Credit unions are owned by the very customers they serve and typically offer the lowest interest rates and fees on everything from everyday bank accounts to car and home loans.
They are customer owned financial institutions that are not profit driven but, are member owned and run with equal share members running and working within the credit union.
If you open a transactional account with a credit union, mutual bank or building society you will automatically become a member and therefore have a vote in what goes on with the institution.
That’s right, a managing director will own a single share as will someone who has just opened an everyday transactional account with them.
This membership is given on receipt of a very small membership fee (usually $2) and will also allow you, the member/owner to vote and become part of the board of directors if you so wish.
Australian Credit Unions
There are roughly 93 credit unions, building societies and mutual banks in Australia. This might seem like a massive amount but, their entire membership base put together doesn’t even compare to 50% of the National Bank of Australia’s customer base.
It is important to remember that a credit union must also be an authorized deposit taking institution and that your credit union must abide by the country’s laws and regulations as well.
What Credit Unions Offer
Credit unions are essentially customer owned banks. They offer everything from an everyday bank accounts to vehicle loans and insurance products.
They typically have agreements with a network of banks and service providers which enable their customers to use their ATM’s free of charge or at a very low cost, they allow you to do online banking, they offer Android Pay and Apple Pay services and they also charge interest on loans as would a typical bank.
Credit Unions Typically Offer:
Should you Choose a Credit Union?
Choosing a credit union over a bank is not a simple decision and, there may be certain products or services that a credit union does not offer which you can get from a bank.
This is not to say you will be missing out on any big ticket items but, the ease, simplicity and diversity offered by Australia’s big banks is not always matched by credit unions that have fewer members and smaller budgets to put towards innovations, upgrades and improvements.
Here are the Top 5 Reasons to Choose a Credit Union:
- You will usually get lower interest rates and lower fees on all personal loans and financial products
- You may benefit from higher rates on savings and investments
- You will very likely get much more personalized service from a credit union than a bank
- You will be supporting your local community
- You get to have a say in the direction and decisions made by the credit union
Possible Disadvantages of Credit Unions
- Some credit unions can unexpectedly merge with other unions
- Some credit unions can become banks
- They may not have a broad network of ATM’s and service branches leaving you with less flexibility
- They may not have all the products, services and features offered by banks
- Their banking and online platforms may lack sophistication and innovation may be adopted at a much slower rate
Better Service – Does it Matter?
Credit unions will always comment about how their service is always better than that of traditional bank because they are not profit driven and are genuinely looking out for your best interests but, does better service really matter at the end of the day.
Absolutely. Published statistics on credit union versus bank customer satisfaction rates clearly indicate that members of credit unions are by far more satisfied with the service levels they receive than bank customers.
Why does it matter? It matters because if you constantly feel like you are being undervalued, ignored and treated like nothing but a number you will always have a bad attitude towards your financial services provider and this will eventually lead to negativity towards all financial responsibilities, transactions and so on.
When you are treated well and like you matter you will always feel better and, more importantly when an agent cares less about selling you a certain product or service and more about guiding you to make the best decisions you will be more likely to find products and services that actually meet your needs and not the bottom line for your bank.
In addition to better service you will always have someone looking out for your best interest at a credit union and as you develop a good reputation and solid relationship with your local branch they will be more willing to help you out and offer you exactly what you need.
When it comes to the largest banks in Australian – even if you’ve been with them for a lifetime they won’t necessarily be more willing to help you or more helpful in general.
Looking to Save for a Goal?
Whether you want to save for a deposit to purchase a home or are looking to save for your child’s education option to bank with a credit union can help you achieve your financial and life goals faster.
For instance if you open a savings account at a credit union not only will you very likely get a higher interest rate on your money but you may even benefit from some bonus dividends as distributed by the union on an annual basis.
Looking to get a Home Loan?
A home loan is likely to be your largest purchase and largest investment and, since you will be paying interest for a significant period of time you will be paying a massive amount of interest.
If you manage to get a lower interest rate on your home loan and lower fees overall you can save thousands over the years and very likely even pay off your mortgage years sooner simply by opting to finance through a credit union.
There are numerous benefits to choosing a credit union over any of the big four banks, their smaller brands or smaller traditional banks and these are mainly lower fees and lower interest rates on credit products and better service.
There can however be certain downfalls particularly in service and product innovations, availability of national branches and even online, tablet and mobile banking shortfall so it is up to you to do your research and choose an option that meets your needs best.