So What Is A Credit Union? Currently serving over 100 million people in the U.S., credit unions are member-owned lending institutions. Credit unions are primarily focused on providing services and goods affordably to anyone who joins and becomes a member. Members in each credit union support each other in achieving their financial goals – as money goes into a credit union, each and every member gains the potential to benefit from the investment. All financial needs can be met through a balanced cycle of giving and receving through savings, withdrawals, and loans. See below for more info on what is a credit union.
Editor’s Note: Interested in credit unions that you can join from anywhere? See our list of Credit Unions You Can Join From Anywhere.
Can You Join A Credit Union?
A good portion of people can qualify for a membership at a credit union based on where they live, go to school, work, worship, or based on what associations/groups they belong to. Some credit unions even allow people to join from just about anywhere. In addition, a vast majority of credit unions will allow you to become a member based on a family member’s eligibility. For example, if you don’t qualify for a member, but your mother, father, or brother does, you can become a member. Some credit unions offer alternatives to join, such as joining an eligible association, which are usually very easy! All in all, there are many perks in gaining access to a membership and that’s why many people will consider joining a credit union.
Credit Union Membership Requirements
Required by law, credit unions need to have a “field of membership” to define the group of people that they serve. The “field” can be as narrow or as broad – but there will always be some sort of restriction as to who can actually become a member. Despite these restrictions, there are credit unions that grant membership if you’re in a certain group, company, community, organization, and/or association, so there’s a good chance you’ll find a credit union in which you can apply.
Typically, you can an organization if:
- An employer sponsors a credit union for his/her staff members
- A family member has membership at the credit union you’re considering
- You’re a part/member of a church, school, labor union. or other groups associated w/the credit union
- A credit union established to service your city/town
Now keep in mind that credit unions are required by law to restrict membership access to the groups they service – although these credit unions may have very simple requirements such as living in the area they serve. Credit unions stress the focus on “common bonds,” which is why fields of membership single out particular communities or groups. Approximately a quarter of these credit unions are “community-based” according to Credit Union National Association (CUNA)’s vice president. In turn, this creates the cooperative nature of credit unions making it more meaningful for the credit union’s members by presenting an option to give back/supporting a community.
After meeting the requirements to join the credit union(s) of your choice, you’ll need to complete an application to establish an account along with proof of eligibility and a minimum opening deposit. The typical minimum deposit is anywhere between $5 – $25 making credit unions accessible to a vast majority of people regardless of their financial status/situation.
Once you become a member/join a credit union, you will be able to remain a member for life even if your initial eligibility changes. Even if you move to a new town, find a new job, or join a new church, you can still have access and rely on your credit union for financial products/services, money management advice, and communal support.
Difference Between A Bank and Credit Union?
It may seem that credit unions and banks offer the same products and services upon first glance. Both types of financial institutions give people a variety of options for saving money, writing checks, using debit cards, and getting loans. The same opportunities for financial solutions may exist at both credit unions and banks – but it doesn’t mean those solutions are created equal. Here are some of the major differences between credit unions and banks:
Attribute | Banks | Credit Unions |
Control | Account holders are customers without ownership rights | Account holders are members with ownership rights |
Purpose | For-Profit | Not-For-Profit |
Earnings | Go to shareholders | Returned to members through dividends |
Fees | Are higher on average | Are lower on average |
Services | Tend to have more | Tend to have fewer |
Eligibility | May allow anyone to open an account | You have to meet criteria to join |
Credit Unions Are Not-for-Profit
One key difference between a bank and credit union is their tax status. A bank is an organization that is for-profit, whereas a credit union is not-for-profit. As listed in the table above, a bank’s profits are returned to their stockholders as earnings – stockholders receive their income through the bank’s customers. To hold their stockholder’s best interest in mind, bank’s are provided with an incentive to charge higher interest and higher fees to bring in higher profits. This is also a motivating situation for banks to drive innovation in order to attract and better service their customers. Banks often offer valuable services and features that credit unions are slower to adopt. Even so, larger banks are more widely available across the U.S., and sometimes internationally, giving their account holders more access to in-network ATMs and branch offices to conduct their transactions away from home.
Credit unions, on the other hand, are not-for-profit. The credit union’s earnings are returned to its members in the form of higher interest rates on their interest bearing accounts (savings, money market, CDs, etc) and provide lower rates on credit cards and loans. If the credit union draws in more money than it requires to operate, they will distribute the excess in the form of dividends to their members who all have an account.
Credit Unions are Member Controlled
Bank account holders don’t have a vote or say in the decisions made by a bank. The board of directors of a bank is required by law to make decisions in the best interest of the stockholders – not the customers of that bank. A stockholder of a banking institution does not need to use that bank for his or her financial needs.
The credit union’s board of directors are elected by its members. This gives members more of an influence on the credit union, as each member has an equal vote no matter how much money they have on deposit or the number of accounts they have through the union.
Products and Services
Although terminology differs for some services, these are the typical and general offerings in each credit union same as what you’d find at a bank. Common financial products and services offered include:
- Personal and business savings
- Personal and business checking
- Consumer loans
- Business loans
- Mortgages
- Home equity loans
- Small business support
Many credit unions are also able to provide financial education and help to members. This can be a big benefit for those who need guidance in making decisions about money or are confused about how particular services work.
Credit Union CO-OP
Joining a credit union also provides widespread access to funds at main offices and local branches as well as through ATMs and mobile banking. ATMs for credit unions belong to a nationwide network called CO-OP, providing 28,000 ATMs for members around the country to use free of charge. You can use your credit union card at other ATMs in a pinch, but this usually incurs a small service charge.
Thanks to the help of CO-OP Financial Services, credit unions are able to offer members access to a nationwide network of ATMs with no fees. Kiosks are available in most offices and branches and at a number of 7-Eleven stores. No matter what credit union you belong to, the shared nature of these organizations means you can use a CO-OP ATM at any location. This allows you to get money out of your account even when you’re not in an area where your particular credit union has an established branch.
The CO-OP network was created by a group of credit unions in California in 1981 before interconnected technology was widespread. The goal was to help improve access for credit union members, and today the network provides ATMs and other services to 3,500 credit unions with over 5,000 branches. If you join a credit union, you have the option of finding an ATM through the location search on the CO-OP Financial Services website or downloading a smartphone app to direct you to the nearest location when you’re on the go. Your credit union will likely also have a search function on their website, making it easy to find a kiosk no matter where you are.
Why Choose a Credit Union
Millions of Americans have chosen to do their banking at credit unions, for reasons both philosophical and practical. Among the top reasons most often mentioned are:
- A Member-Centric, Not-for-Profit Model
- As member-owned organizations, credit unions are able to direct their products and service offerings toward the well-being of their members, without a competing need to generate and maximize profit at their members’ expense.
- Low Fees and Superior Rates
- Credit unions boast lower fees and superior rates as compared to their bank counterparts on the whole, as seen in the charts in the section below.
- Excellent Customer Service
- Since the customers are the member-owners in the case of credit unions, credit unions place a heavy emphasis on excellent customer service.
- Local Roots & Community-based Focus
- Credit union membership is typically based on commonality in location, employment, and other factors. As such, credit unions are able to maintain a narrow focus on supporting their particular communities.
- They aren’t Megabanks!
- To put it mildly, megabanks haven’t enjoyed the best reputation in recent years. In the above ways and many more, credit unions represent a sort of ‘main street’ antithesis to these major Wall Street banks.
Is My Money Safe?
Credit unions and banks are regulated by different organizations and use different insurance funds, but the coverage is similar. Most credit unions are federally regulated through the National Credit Union Administration (NCUA), while the deposits are insured by the National Credit Union Share Insurance Fund (NCUSIF). It’s important to note that not all credit unions offer government-backed insurance, so be sure to verify that your credit union is a member of the NCUA before selecting the financial institution.
The National Credit Union Share Insurance Fund is similar to the FDIC, except that it insures member accounts of federal and state-chartered credit unions rather than account holders at banks. It was created by Congress in 1970 and is also backed by the United States government.
Members’ deposits are federally insured up to $250,000 per individual depositor. It is also possible to qualify for more than $250,000 in coverage if you spread your money across different ownership categories, including, for example: individual accounts, joint accounts, revocable trust accounts and certain types of retirement accounts.
According to the NCUA, “Not one penny of insured savings has ever been lost by a member of a federally insured credit union.” This strong statement of confidence provides assurance to those looking for an alternative to traditional banks.
Author’s Verdict
As you can see, banks and credit unions offer the same financial products to some extent. Here are a few reasons why you should consider becoming a member at a credit union: credit unions are not-for-profit institutions, credit unions tend to pay higher interest rates and have lower fees, your funds are NCUA insured up to $250,000, and much more! If those benefits alone (along with many more) sound great to you, definitely consider a membership at a credit union! Let us know in the comment section below on your thoughts and experience with credit unions! Be sure to check back on BankDealGuy for more bank deals!
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