Should I join a credit union after bankruptcy?
You may want to consider using a credit union instead of a traditional corporate bank. Credit unions can help to rebuild credit after bankruptcy and can provide an alternative method for storing funds.
Many people are unfamiliar with how credit unions work or what benefits they might be able to offer. Simply put, credit unions are financial cooperative organizations that are controlled and owned by their members.
Unlike corporate banks, credit unions are not organized to make large profits for a group of people who may or may not keep actual funds with the organization. Instead, they consist of owner-members who benefit directly from any profits the union accumulates.
Members of credit unions are “paid” their share of the union’s profits as interest on savings accounts (or, in the terminology of credit unions, “dividends” on “share accounts”) or reduced interest rates on loans. When taken as share dividends, credit union profits are taxable like any other income.
Membership is a unique feature of credit unions. Only credit union members can deposit money in a credit union, and only members are eligible for loans given by the union.
Credit unions have a reported 87 million members in the United States alone and are by no means exclusive or impossible to break into. While some unions are based on particular affiliations, some unions require only residence or employment in a given state.
Members also elect a board of directors who work on a volunteer basis to establish interest rates and other organizational tools.
Pluses and Minuses of Credit Unions
Dividends on credit union share accounts tend to be higher than interest rates on savings accounts in banks. This is because profits from credit unions go almost exclusively to member-owners. Similarly, interest rates on loans are often lower than those offered by corporate lenders.
Many credit unions offer amenities similar to those available at large banks, including share (savings) accounts, share draft (checking) accounts, credit cards, online banking, and share term (deposit) certificates.
Interest rates on credit cards, car loans, and home loans issued by credit unions tend to be lower than those issued by banks, according to a report from CNNMoney.com. Additionally, credit unions are more likely to offer loans to borrowers with limited or blemished credit histories.
Because of this, credit unions can be excellent for those trying to get stronger after bankruptcy or recent graduates who haven’t yet established much credit.
Keep in mind that credit unions may not always live up to some benefits provided by larger banks. For example, credit union-issued credit cards tend to have less impressive rewards programs than cards from corporate lenders, according to reports.
Also, depending on the size of the credit union, convenient ATMs may be hard to locate.
If you’re looking for a new way to handle your money or a new lender for some big-ticket purchases, you may want to investigate credit unions in your area by visiting this Web site: www.creditunion.coop.
Before making any major decisions, though, be sure to consider all your options or consult our office for tailored advice. We can be reached at 248-246-6536.