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What are the pros and cons of credit unions?

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The One Freeman posted on Sun, Nov 25 2012 4:24 PM

In a recent debate with a mutualist, we've been discussing credit unions and interest rates as "theft" in general.

He believes that charging interest on loans is theft, except for simple transaction costs. In his mind, credit unions can then push down interst charged on loans dramatically, almost to zero, but would still be able to give competative interest rates to its depositers because it's not for profit.

I was obviously skeptical of someone being able to offer near 0% interest on loans with competative, but he directed me to his credit union's site, https://www.becu.org/, and sure enough they offer their interest rates at a pretty good level.

As their page shows, he obvious exagerated the "near 0%", but it is interesting to see them offer a much higher interest rate to depositors than someone else, say, JPMorgan Chase.

So my question is, are credit unions really better than for-profit investors in every way?

Malo periculosam libertatem quam quietum servitium.

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cab21 replied on Sun, Nov 25 2012 4:47 PM

credit unions have interest rates, so if he thinks that is theft he has a proplem with credit unions

interest is simply payment for oppurtunity costs. people pay it on when receiving a loan and get it when giving a loan or when saving.

how is the credit union work if it pays more or eaqual for savings than it receives for loans? the fees would have to be huge i think

i think what is better depends on each persons personal taste and position.

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He believes that charging interest on loans is theft, except for simple transaction costs

This is quasi-religious nonsense. In the current environment, where banks have been coopted by the state, I don't think credit unions play by the same rules, so they are able to stick to more conservative lending policies.

The obverse of very low interest rates for loans is even lower interest rates for savings. So what's the saver/lender getting out of it?

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He believes that the credit union is trying its best to eliminate charging interest, but since it needs to cover its costs it has to charge a little bit, and he's just getting any spillover that they have. The reason that it's still competative though even though its basically accidentally incurred is that it's not a for-profit business and it's not going to the "owners" of the bank, since the customers are now the owners.

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cab21 replied on Sun, Nov 25 2012 5:16 PM

the money goes to the owners in either system difference is simply who the owners are.

if people have a voluntary nonprofit bank and make their income elsewhere they could go for cost of operations in prices, but if people have to make a living from working at the credit union costs will be higher.

0 interest  and a fee can be a worse deal than interest and a rebate or no fee.

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What do the consumers get out of it in their capacity as owners?

 

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I'm a bit confused. How do you mean? What consumers? You mean the people taking out loans to spend?

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The individuals offering the loans.

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