College is an exciting chapter for many people, opening doors to new experiences, newfound freedom, and independence. But it can also be a financially difficult and dangerous time — the financial mistakes people make as students can haunt them for years to come.
Many young adults report a lack of financial education. According to a survey of Gen Z students, 83% did not learn about finances in high school or college. Also, according to the Financial Industry Regulatory Authority (FINRA), 61% of adults are unable to answer more than three of the five questions posed in a survey related to financial knowledge and decision-making. So, if many students don’t know what the interest rates are on their credit cards (if they have one), or how interest rates affect the big picture of what they owe on debts, they are left vulnerable and may be taken advantage of by major banks targeting them with tempting offers designed to gain profit.
That’s why students should look to their local credit union.
So what is a credit union exactly? Like a bank, a credit union is a financial institution that offers checking and savings accounts, as well as loans like credit cards and vehicle financing. Unlike banks, credit unions are not-for-profit and member-owned, which means they tend to make decisions based on what will best benefit their members and their community. They are large enough financial institutions to properly handle your financial needs, but small enough to know each member’s name. Due to this, credit unions are able to get very personal with each one of their members and help them with their individual financial needs in the best way possible.
Now that you have a better understanding of what credit unions are and how they operate, here are five reasons why college students should join a credit union:
1. They’re Committed to Financial Education
Credit unions are built on the foundation of people helping people. The 1934 Federal Credit Union ACT (FCUA) codified credit unions’ focus on promoting financial literacy to the communities they serve. They do this by offering free webinars, events, and blogs on topics such as planning for retirement, managing debt, building a monthly budget, and many more highly valuable lessons about financial health. Credit unions want to ensure the financial well-being of their members and community, and help them make better money decisions in the future.
2. They’re Not-for-Profit
Since credit unions are not-for-profit, the profits they make go right back to their members through benefits like higher savings rates and fewer fees compared to big banks, as well as unique products and services. This allows credit union members to achieve their financial goals in a more efficient manner and also save money to fund their daily lives. Plus, credit unions work together as a cooperative, which means that members have access to over 30,000 surcharge-free ATMs nationwide. That gives members more access to their money than most banks!
3. They Are Owned By Their Members
When you join a credit union, you’re not a customer — you’re a member. And instead of having stockholders, all members own a piece of the credit union as shareholders. You heard that right — when you join a credit union you own a piece of the credit union. As a result, credit unions are known for their superior member experience. Since credit unions are locally headquartered, it’s often faster and easier for members to connect with a live person when they have a question about their account(s) or need to discuss an urgent matter. Furthermore, credit unions have a tendency to listen to the individual needs of their members. The Board of Directors within credit unions is purely comprised of elected members who voluntarily choose to guide the vision of their credit union. So, as members themselves, they act with the community’s best interests in mind.
4. Community Focused
In addition to promoting financial education, credit unions are active in their communities. They tend to sponsor community events and nonprofits, support local schools, and encourage staff to participate as volunteers in causes that are important to their members and the community they serve. Many credit unions adopt employee volunteer programs that encourage their employees to spend time volunteering for nonprofits they are the most passionate about. This is a way for credit unions to effectively give back to their community while also showcasing their morals and values.
5. They Can Help You Save Money
Credit cards from credit unions have a capped interest rate under federal law, which limits the borrower’s risk of rising interest rates while also allowing the lender to earn a higher return when rates are low. In 2017, the average interest rate on a credit union credit card was 9.37% compared to an average of 12.24% for a credit card from a bank. Another great part about credit unions is that they are generally more open to working with people who have unsatisfactory credit or struggle to qualify for a loan compared to big banks, as they understand the needs of their communities and are interested in educating members and finding appropriate solutions. So, if you are looking to finance a new house or car, then a credit union would most likely be your best bet.
So, now that you have a better idea of what credit unions are, it’s clear why it’s more advantageous for students to open an account with a credit union as opposed to a bank. Overall, credit unions are an excellent choice for a financial institution when it comes to creating and leveraging students’ first checking and savings accounts, credit cards, and loans. If you are a college student seeking a financial institution that aligns with your values and can best help you with your financial endeavors, join a credit union today!