5 Reasons Credit Unions are a Better Financial Choice for Young Families
Having a young family is exciting and full of fun firsts and lots of adventures, but it can also pose a lot of challenges, especially when it comes to money. New parents have to deal with a lot of new expenses and even new financial goals, such as saving for their child’s college education, childcare, extracurriculars, and more.
This can all seem like a lot for new parents to handle, but the good news is that the right financial institution can give you a lot of help while you’re navigating the financial challenges of parenthood. You might be forgiven for thinking that institutions like big banks would be able to provide the most help, but the truth is that credit unions can provide help for young families that bigger banks just can’t match.
Lower Fees
New parents aren’t famous for having a lot of extra money, and banks are known for assessing fees, including ATM fees, monthly fees, and overdraft fees. Even if some of these fees are small individually, they can quickly add up. In 2020, banks made close to $4 billion dollars in fees alone!
Credit unions, on the other hand, are not-for-profit, so their fees are usually lower. They’ll also be clearer about just what those fees are, and if you need to have a fee waived the procedures are going to be easier than those found at a large bank. As a parent, you need things to be easy!
Better Interest Rates
Since credit unions are more concerned with meeting their member’s needs instead of making huge profits, they can offer better interest rates. In general, a credit union loan has a lower interest rate than a similar loan from a bank, which can end up saving you hundreds of dollars, if not thousands, over time.
For example, the average credit union interest rate on a new auto loan is 2.87% APR versus the average bank interest rate at 4.78% APR. To put that into context, on a $30,000 auto loan with a 60-month term, that would be roughly an additional $30/month on your payment or an extra $1,500 over those 60 months paid in interest alone! As a parent, we’re sure you can think of better things to spend $1,500 on than paying the bank.
Also, credit unions offer higher interest rates on their savings accounts, which means the money you put in a credit union savings account will earn more over time than it would if you kept it in a bank’s savings account. This makes credit unions an excellent choice if you’re working on financial goals from increasing your emergency funds to saving for your child’s college tuition.
Better Chances of Being Approved for a Loan
Everyone needs a loan eventually, whether you’re buying a family-friendly car or getting a mortgage for a bigger house. Unless you have a sterling credit score, though, you’ll have a hard time getting a bank to approve your loan application.
Credit unions, on the other hand, are known for working with their members to help them get a loan. While a credit union’s loan advisor will take your credit score into consideration, they’ll also look at your financial situation and talk with you about why you’re applying for the loan and what it will help you achieve. Credit unions want their members to succeed, and if a loan advisor thinks a loan will help you, they will work with you to help you meet your goal.
Better Credit Card Choices
Credit cards can be a lifesaver, especially if you’re a new parent who has to make an emergency purchase like diapers or baby food. However, their high-interest rates and annual fees also make them a double-edged sword.
When you get a credit card offered by a credit union, though, you’ll get a much lower interest rate than credit cards offered by other financial institutions. According to one study, the average interest rate on a credit union credit card is 9.37 %, as opposed to the 12.24 % interest rate on an average bank’s credit card.
In fact, a credit union credit card can even help you get out of the debt you accumulated on other cards. Tools like a balance transfer or debt consolidation can make paying down your existing credit card debt easier.
Help Children Learn Financial Literacy
If you want your kids to learn good money habits, you’ll find everything you need to get them started at a credit union. Kids can start learning about money by opening their own youth account. They can even watch their account grow when they use a credit union’s online banking platform or mobile app.
Parents can also use their online banking account to keep an eye on their children’s youth accounts, and it’s worth mentioning that online banking has a lot of features adults will find useful too, such as an electronic bill pay service and the ability to transfer money between accounts 24/7.
You can also start funding your child’s education at a credit union by opening a Coverdell Educational Savings Account. It has a higher interest rate than other savings accounts, and you will be able to withdraw the money tax-free for qualified educational expenses.
Prepare for Parenthood With First Alliance Credit Union
Credit unions might not be as big as some banks, but their not-for-profit nature lets them provide benefits to young families that other financial institutions can’t. Lower interest rates and fees can save new parents a lot of money, and credit union loan officers are more willing to work with parents to help them get much-needed loans for anything from family-friendly cars to homes that will accommodate a growing family. You can even teach your child financial literacy with the help of a credit union’s youth and teen account.
If you’re looking for a credit union that can help you navigate the financial challenges of parenthood, become a member of First Alliance Credit Union today. In addition to our wallet-friendly savings and loan options, you’ll also be able to use our robust online banking platform and mobile app to help you keep track of all the expenses you have as a young family. Plus, you can also use the free calculators, worksheets, and comprehensive education guides in our online resource center to start planning for financial goals from buying a new house to paying for a family vacation.
