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  • James Veal

Are Credit Unions Actually Better Than Banks


No matter the market situation, you always want to have some cash reserves. We need to have checking and savings accounts for our day-to-day transactions and paying bills. But have you noticed - banks (especially the larger ones) are paying less and less on these types of accounts.


But did you know there's a way we can earn more on our cash, have friendlier encounters, help local communities, and turns our noses up at the big money-banks that are sucking our lifeblood.


Yes, you'd probably guessed it! The credit union.

You've probably have one in the neighborhood. But if you are like most people I talk to, they figure there's no real practical difference between a credit union and a big-name bank. But they are different. And at times like these, the benefits of joining a credit union are important.


Very simply, credit unions are nonprofit companies that act as local community banks. And guess what? Credit unions offer much better rates than what you'll find at a bank.


For example, one of the largest bank's in the Philadelphia area currently offers just 0.02% on a CD for any term up to 24-months. But at the Philadelphia Federal Credit Union, you can get a 24-month CD that'll earn you 0.50% APY. (We do not endorse or recommend any specific financial institution). So even at the high end for the bank, if you deposit $50,000, that's a difference between $20 and $500.


Even better, Wall Street doesn't have access to any deposits that you put into a credit union. You see, the credit union turns around and loans your money to other members. Rather than investing in insider shell games – like the mortgage-backed securities at the heart of the 2008 financial crisis – the credit union is making auto, boat, and home loans to the local community.


Are There Any Risks

Are there any risks? Not really. Your money is as safe, if not safer than the larger commercial banks. Just like the Federal Deposit Insurance Corporation. (FDIC), which is supposed to insure your deposits in a commercial bank, credit unions have the National Credit Union Share Insurance Fund (NCUSIF). This fund is also backed by the "full faith and credit of the United States government," as well. And just like commercial banks, each individual is insured up to $250,000.


The only catch to joining a credit union: You must have a legal affiliation with the group that sponsors it. For some credit unions, you must work for particular employers. In other cases, you need only be a resident of a particular state.


By banking with a local credit union, I'm giving my capital to local people and businesses, instead of the huge Wall Street firms that often use it to pay their executives big fat bonuses. Keep your money local.


To find out more about how to join a credit union, go to http://www.asmarterchoice.org.



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