In The COVID-19 Crisis: Is A Credit Union Right For You? (Forbes Review)

Today, consumers have more banking choices than ever when it comes to how and where they’ll manage their money: traditional brick-and-mortar banks, online-only banks, robo-advisors, fintech apps. Another option is the credit union—a financial institution that can range from small and local, to truly national in scope.

For consumers who have become jaded about the banking industry, the promises of credit unions—from excellent customer service and financial education to impressively competitive rates—can generate cynical responses. But there are some very good reasons 117.5 million Americans chose credit unions for their financial needs as of 2018.

Here’s what you can expect from a credit union if you choose to become a member.

What a Credit Union Is

A credit union is a financial institution, like a bank, except its ownership is different. By joining a credit union, you are becoming a member of a not-for-profit cooperative. The credit union members own the institution, rather than its being a traditional bank that has private owners or public shareholders.

To become a member, you typically must be affiliated with whatever common bond the credit union serves, such as your professional industry, your geographical community, your membership in another organization or your faith.

Since credit unions are less motivated by profits for the sake of profits, they can put more energies toward meeting the needs of their members.

Credit unions also generate a lot of enthusiasm among both their members and the employees who serve them. Jill Sammons, vice president, Marketing and Brand Strategy, of the Illinois-based credit union BCU, wishes more people understood the benefits of banking with a credit union. “People often don’t take credit unions seriously as an option because the offerings seem too good to be true,” says Sammons.

While it’s no surprise that a credit union marketing professional would be an advocate, as Sammons says, people “want to know what the catch is. But there is no fine print and there is no catch. We really are here to make your life better. I want to scream that from the rooftops.”

Competitive Rates

Excellent interest rates—both higher savings rates and lower loan rates—often are touted as one of the reasons to pick a credit union over a traditional bank. According to a report by the Credit Union National Association (CUNA), this commitment to competitive rates has an average annual financial benefit of $178 for a household belonging to a credit union. Single credit union members see a still-impressive $85 annual benefit.

You can expect such financial benefits because of the not-for-profit nature of your credit union. As a not-for-profit institution, all the profits made by a credit union are returned to the membership in one way or another. For instance, Sammons highlights BCU’s checking account, which offers a 2% APY, as one of the ways members get to enjoy the credit union’s profits.

Many credit union members also may enjoy periodic dividend checks. Members are more likely to find accounts with no or very low minimum balance requirements, lower fees for overdrafts or out-of-network ATM use and lower APRs on loans. You may even find that it’s easier to qualify for loans through a credit union than through a traditional bank.

The Benefits of Membership

Credit unions do not answer to owners or shareholders, which means members can generally expect their credit union to make policy decisions centered on their needs rather than any other metrics.

According to Mehdi Dinia, assistant vice president of Membership Acquisition and Operations for Navy Federal Credit Union, every decision the leadership team makes focuses on the members: “Member services are so important to us that if a policy, product or service is not going to benefit members, at the end of the day, we won’t do it.”

This kind of decision-making is often described as “excellent customer service,” even though that phrase hardly does justice to the reality of banking with an institution that makes decisions based on what will be best for you: the consumer.

Ultimately, this means that credit unions want to make sure your financial health is taken care of, rather than to simply provide you with products and services. Dinia gives the example of young new service members coming into Navy Federal Credit Union (which primarily serves military members and their families) for an auto loan. In many cases, these enthusiastic young soldiers and sailors are excited to take out a loan for a $40,000 car—which could easily become an expensive long-term financial mistake.

Since the credit union wants to help its members make savvy financial choices, Dinia explains that NFCU employees will take the time to walk such a prospective car buyer through the implications and options of taking on such a large auto loan. The result? The member walks out happy with the necessary information and the loan product they need to buy an affordable car, rather than saddling themselves with too much debt.

In addition, members often can expect to have a single point of contact at their credit union. Instead of having to deal with a different customer service representative every time you call or stop in at a branch, you may enjoy a long-term relationship with an employee who understands your needs.

While the ways in which each credit union works to meet its members’ needs can vary from institution to institution, you can count on the fact that your credit union will have policies, products and services in place to support your overall financial health. From financial education to personal relationships, credit unions want to make certain you can thrive and grow.

Caring for Their Communities

A credit union typically takes its commitment to its members seriously. Because this commitment extends to the communities in which their members live and work, many credit unions take an active role in community life—from hiring locally, to focusing on local needs.

For instance, as a financial institution serving military members, Navy Federal Credit Union hires a number of veterans and active spouses, according to Dinia. Not only does NFCU recognize that these employees have a unique understanding of the needs, expectations and experiences of the credit union members, but also, hiring from this pool of applicants is another way for the institution to support the community.

This also means that credit unions work to be where their community most needs them. Since credit unions serve a particular group that shares a common bond, these financial institutions make sure they are available when and where their members gather.

UnitedHealth Group and Target, two of the employers served by BCU, are headquartered in the Twin Cities, where these two companies employ approximately 45,000 workers. Sammons explains that even though BCU is headquartered in northern Illinois, the institution not only maintains an important geographic footprint in the Minneapolis/St. Paul area, but also partners with both UnitedHealth Group and Target to support the Minnesota institutions and programs that are important to these companies.

Many credit unions also prioritize charitable giving as part of their charter. For instance, according to Sammons, BCU gives 1% of its net income every year to charitable causes. Choosing to bank with a credit union can be an easy way for members to give back to their community or to charity.

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Responding to Tough Times

Since credit unions center on the needs of their members, it should come as no surprise that they provide nimble responses to members going through difficult times. Both Dinia and Sammons explain that their credit unions’ responses to the current COVID-19 crisis are informed by previous responses to natural disasters and other major financial disruptions.

According to Dinia, “The financial issues we’re seeing from COVID-19 were not new to us at Navy Federal Credit Union. We’ve always been close to our members and embedded in our community, which means we’re able to respond quickly to their needs, especially in tough times.”

Sammons explains that BCU’s member-focused responses to the current crisis (as well as previous crises) stem from a trust in their systems and in their employees: “We have response mechanisms for things like waiving fees already in place that just need to be set up in the wake of a disaster. Our employees know that these systems are in place, so they are able to focus on empathy for our members and on providing us with feedback about what our members need most.”

What do credit union members need during the COVID-19 crisis? Some of the benefits currently on offer to members include fee waivers, loan extensions, emergency relief loans, credit line increases, increases on remote deposits, education about scams and even one-on-one financial counseling. This sort of agile response is possible because credit unions are likely to have the sorts of systems and protocols in place to offer help when you need it.

Potential Drawbacks of Credit Unions

Although there’s ample reason for Sammons’ impulse to shout from the rooftops about the benefits of banking with a credit union, these institutions are not necessarily the right fit for everyone. Knowing whether you should choose a credit union does require a clear-eyed look at their potential downsides.

To start, not everyone will necessarily qualify for membership. Since credit unions serve individuals who share a common bond, you may find that you do not live in a geographical area, belong to an organization, work for an industry or share a faith with a community served by a credit union.

That said, many credit unions are open to family members or other connections to the community they serve, and some credit unions allow you to become a member simply by paying a nominal membership fee. But, unlike shopping around for a traditional bank, you may have to sign up with whichever credit union you are eligible to join.

In addition, while credit unions have done a great deal of catching up in the past few years, they may be less likely to be on the leading edge of financial technology, compared to traditional banks. This can potentially cause some added inconvenience if you are not located near a branch of your credit union, since credit unions also tend to have fewer branches and ATMs than large national banks. However, as cooperatives, they also can join together to offer additional access.

You can expect virtually all credit unions to offer online and mobile banking options that extend their footprint both online and off-line. The differences in features tend to be determined more by the size of the institution: Larger credit unions are competitive with the technology offered by the banking giants, while both smaller credit unions and smaller banks may have more plain vanilla offerings.

Finally, since credit unions are focused on the needs of their members, you are less likely to find the full array of financial products all under the same roof. If very few members need a particular type of loan, for example, your credit union is unlikely to offer it, even though you could easily find such loans at a traditional bank. Similarly, unlike bank credit cards, which may come with a variety of high-value perks and rewards, credit union cards may offer less generous rewards and lower credit limits. (Again, this difference may be a function of the size of the institution.)

Is a Credit Union Right for You?

Banking with a credit union has a number of impressive benefits, including a heightened sense of working with a partner who has your financial best interests at heart. And while there is no fine print when it comes to these perks, this doesn’t necessarily mean a credit union will fit everyone perfectly. However, for anyone who has never considered a credit union because it seemed “too good to be true,” taking the time to investigate what you’d get out of membership could be worth your while.