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Why Do Credit Unions Have Better Interest Rates?

There’s a reason more than 130 million people belong to a credit union. Consumers flock to credit unions over traditional banks for higher dividend rates, minimal account fees, and lower interest rates on loan products. The ability to earn more on deposits and pay less in fees and interest charges entices savvy consumers to open an account. But how can a small army of 5,000+ federally insured credit unions offer these benefits and a host of other financial benefits to everyday consumers?

Credit Unions are Member-Owned, Not-for-profit Organizations

Most banks operate as for-profit financial institutions that answer to stakeholders. In this environment, the focus on profits influences everything from lending decisions to interest rates assigned to loans. Earnings are often returned to private investors or shareholders, not customers. Unlike credit unions, banks maintain a distant, transactional relationship where customers exchange money for services.

But when you open an account at a credit union, you become part owner of a not-for-profit cooperative financial institution. Unlike bank customers, credit union members have voting rights that give them a say on matters related to the direction of the institution. But the real draw of not-for-profit credit unions is that profits are redistributed to members in the form of:

  • Fewer account fees
  • No checking account minimums
  • Higher earnings on deposit accounts

Since credit unions exist to strengthen the financial lives of their members, the institution’s financial success is shared with the membership – which is why credit unions are known as “financial cooperatives.” For example, Member #1’s deposits might help fund Member #2’s low-interest rate loan. By focusing on returning value to the membership, credit unions are able to offer rates that beat those of traditional banks.

Plus, members typically have access to:

  • More flexible lending decisions than traditional banks
  • Personalized member support
  • Free financial education resources

Better Loan Interest and Savings Rates Across the Board

Bank customers are unlikely to experience the rewards of belonging to a profitable institution – at least not in their bank accounts. Credit unions use account deposits and other earnings to provide members with competitively priced loan products and significant cost savings. In fact, you’ll often hear the phrase “people before profits” associated with credit unions.

The National Credit Union Administration (NCUA) publishes quarterly product comparisons, confirming what 100+ million members already know – credit unions offer better savings rates and lower borrowing costs across the board. On average, credit union members earn more on their deposits and pay lower borrowing costs in nearly all 23 loan and product categories.

What’s The Catch?

The savings opportunities available to credit union members are undeniable, but consumers should also understand that not every institution offers the same level of products, services, or convenience. For example, individuals with prior banking experience might be concerned that some credit unions could have:

  • Limited ATM availability
  • Fewer physical branch locations
  • Membership requirements (though today nearly anyone is eligible for credit union membership!)

Despite what might be minor inconveniences, the numbers don’t lie – especially on the topic of money! The financial benefits of credit union membership outweigh those available to the average bank customer. Plus, depending on where you open an account, the credit union might:

  • Belong to an expanded ATM network that allows fee-free withdrawals at participating ATMs or refunds on transaction fees
  • Provide online and mobile banking services comparable to traditional banks along with other cutting-edge banking technologies
  • Be part of a shared branch network that allows you to complete transactions in person at partner credit unions
  • Have flexible member eligibility requirements
  • Only require that you deposit a nominal amount ($5 or less) to open your account
  • Offer an expansive list of financial products besides deposit accounts and loans

It’s easy to see why credit unions are the best choice for keeping more cash in your wallet. If you’re ready to take advantage of all credit unions have to offer, we can help match you with one! Get started today!

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*APR = Annual Percentage Rate

In order to apply for a loan, you must first pick an individual credit union from which you wish to borrow. You can apply for the loan without being a member of the credit union you select, but you will need to become a member of that credit union in order to receive a funded loan. Therefore, it's important that you select a credit union that you will be eligible to join. Credit union membership requirements can include where you live, work, or attend school. Results are based on membership criteria provided by individual credit unions and do not imply a guarantee regarding accuracy or eligibility to join the listed credit union(s).

Calculations are based on the lowest possible rate and available repayment terms per lender. Rate estimates are based on credit information entered by the user and will not impact your credit. During the application process, a hard credit inquiry will be performed to provide exact rate information. Repayment calculations assume immediate full repayment. View the full range of rates and terms by visiting your credit union's website using links listed for each credit union above.

Using the free student loan refinance calculator does not constitute an offer to receive a loan and will not solicit a loan offer. Any payments and savings will depend on the actual amounts for which you are approved, should you choose to apply. This calculator is provided for educational purposes only and should not be relied upon as financial advice. Always consult your credit union or financial advisor when making your decision.

IMPORTANT NOTICE for refinance borrowers: By refinancing federal student loans, you may lose certain borrower benefits from your original loans. These may include interest rate discounts, principal rebates, or some cancellation benefits that can significantly reduce the cost of repaying your loans. Please review this important disclosure for more information.

Your actual rate within the range stated will be disclosed upon approval. Student borrowers may apply with a creditworthy cosigner which may result in a better chance of approval and/or interest rate.