College students will face a lot of choices as they’re learning how to be adults. One of those choices is the financial institution they’ll use. This choice can have far-reaching effects on their lives.According to a 2017 study by Bankrate, the average adult has used the same primary checking account for about 16 years. That’s why you’ll see several banks around college campuses offering free t-shirts or dorm room toasters in return for starting an account with them.
While all these incentives might be tempting, they’re also irrelevant. If you want a financial institution that can actually help you during your college years, walk past the t-shirts and toasters to your local credit union. They may not give you a free toaster for opening an account, but what they do offer can give college students a solid platform for financial success that will last the rest of their lives.
The biggest difference between a bank and a credit union is their underlying structure. Banks, first and foremost, are for-profit businesses. Their main priority is making money and maximizing profit.
Credit Unions, on the other hand, are not-for-profit financial institutions. They were created to serve a specific region or organization, and as such they are focused on helping their members (a.k.a. customers). This also means a credit union is much more likely to be in touch with the specific needs of its members.
While this is beneficial for all a credit union’s members, it’s especially helpful for people who have little to no experience with financial institutions, such as college students. After all, which type of financial institution has more incentive to make sure its members treated fairly—one that views its members as a way to make a profit or one that was created to serve them? (Hint: Ask Wells Fargo.)
College students aren’t famous for having a lot of money, and banks are known for assessing fees on everything from ATM transactions to getting paper statements. In 2017, bank customers spent an average of $329 on fees, according to the online banking provider Chime. That’s a lot of money to most people, let alone a college student!
Since credit unions are not for profit, though, their fees are usually lower or none at all. They’ll also be clearer about just what those fees are, and if you want to get a fee waived the procedures are going to be easier than those found at a large bank.
Higher Saving Account Rates
The reason anyone puts money in a savings account is because of the interest it earns while you’re not using it. According to data provided by the national interest rate-tracking service DataTrac, a credit union offers an interest rate that is an average of 0.20 to 0.35 percent higher on savings accounts, money market accounts and CDs.
Better Credit Card Deals
Speaking of better rates, DataTrac also revealed that credit cards offered by credit unions have a much lower interest rate than credit cards offered by banks. Many credit cards offered by credit unions also forego the annual fee. This can save students a lot of money in the long run!
While the ability to take out a loan can be a double-edged sword, there’s no denying that a lot of college students don’t have the credit history to be taken seriously if they apply for a loan. Fortunately, many credit unions will be happy to work out a loan with you.
Some credit unions will even approve you for a “signature loan,” which is an unsecured loan that is only guaranteed by your signature. If used wisely, this can be an excellent way to build up your credit history.
As Accessible as Big Banks
The one advantage big banks have always claimed in the past is that they have more branches, so you can visit a branch almost anywhere you go. However, the Internet has completely changed the way we interact with financial institutions. More often than not, you can go online and access your account anywhere you have a good connection—some credit unions will even let you cash a check by taking a photo of it with a mobile app on your smartphone!
Even if you do find yourself needing to visit a credit union branch while you’re out of the service area, you should be able to find another credit union that participates in the shared branching network. This lets members of one credit union access their account at any other credit union in the network, even if they’re overseas.
The fact that credit unions are smaller than banks gives them one major advantage—the ability to deliver the kind of personal service that the big banks just can’t manage. Since a credit union is smaller, you can usually talk to a live person instead of muddling your way through a series of automated menus.
If you’re just starting out on your own, why not select a financial institution that is on your side? A credit union like First Alliance has the tools and information you need to give you the best possible financial start to your adult life.