What Is a Credit Union? – How to Join a Credit Union

What is a Credit Union? Have you heard about the Credit Union before? Then if you really want to know all about this then here is a chance for you to keep on reading and get all the necessary information. But when reading you shouldn’t skip any part.

What Is a Credit Union
What Is a Credit Union

Read this article like a novel and get to know all about this, so you won’t have anything missed or misunderstood.

What Is a Credit Union?

A credit union is simply a nonprofit financial institution that is owned by the people who use its financial products. Credit union members or users can even get access the same kinds of products and services as provided by a traditional bank, such as credit cards, checking and also savings accounts and loans. Members simply elect a board of directors to be able to manage the credit union to make sure that their best interests are represented.

Credit unions also aim to serve their users or members by offering competitive products with better rates and fees than you see with a for-profit bank. Like a bank, credit unions simply charge interest and account fees, but they will reinvest those profits back into the products it offers, whereas banks offer these profits to their shareholders.

Since a credit union is simply owned by members, you will need to meet eligibility requirements in order to qualify to open an account, and then be able to apply for a credit card or take out a loan. The eligibility requirements differ across credit unions, which are then explained below.

What Is a Credit Union vs. Bank?

Now while credit unions are very similar to banks, there are a few factors that simply set them apart. Here is a review of the main differences:

Credit union vs. bank

Credit unionBank
StructureNonprofitFor profit
Membership requiredYesNo
Branch accessTypically localTypically national
Amount of product offeringsMore limitedWide variety
Deposit insuranceYes, by National Credit Union Administration (NCUA)Yes, by Federal Deposit Insurance Corporation (FDIC)

 

The main difference between credit unions and banks is simply that the credit unions are simply nonprofit, member-only financial institutions and the banks are for-profit institutions open to everyone. In addition, credit unions were often created to serve specific regions, communities, or businesses, so they are likely known for providing better in-person customer service at their physical branch locations.

You might have a smaller selection of product offerings with a credit union over a bank. For example, the credit union may only just offer one or two credit card options, compared to a bank that might even have a dozen choices for all kinds of lifestyles.

But, fewer products do not mean less competitive offerings: Credit unions offer some more of the best terms thanks to how they reinvest profits back into their products.

Now when it comes to deposits for checking and also savings accounts, it is very important to make sure the money you deposit is insured. Thankfully, most credit unions simply offer the same $250,000 insurance that banks do. However, there is a small difference: Credit unions are been insured by the National Credit Union Administration while the banks are simply backed by the Federal Deposit Insurance Corporation (FDIC).

How to Join a Credit Union

You can simply become a member of a credit union in lots of ways, but each has its own requirements. You might then qualify if you live in a certain town or work with an eligible employer. Another option may be through affiliation with certain groups, such as labor unions or schools. You may also qualify if one of your family members is already a member of a particular credit union.

If you do not meet any of the eligibility requirements, then there may still be a chance you can join. Some credit unions will let you to become a member by joining a participating organization. This sometimes comes with a very little fee, though the credit union may pay it on your behalf.

For example, Alliant Credit Union allows you to become a member by simply joining the charity Foster Care to Success, and Alliant pays the $5 fee simply on your behalf.

In addition to meeting eligibility requirements, you can be required to pay a one-time membership fee (generally up to $25) and also open an account with a small deposit (usually below $10).

When you are then shopping around for credit union products, you must start with your local credit union, since you will likely have better chances of meeting membership eligibility requirements compared to a credit union based outside of your local community. If they do not have the financial product you are looking for, you may want to consider other, non-local credit unions that let anyone to join.

Advantages of Credit Unions

Credit unions might then offer some advantages that set their product offerings apart from banks:

  • Lower interest rates on credit cards and loans: Credit unions provide some of the lowest interest rates on credit cards and also other financial products, saving you a great deal of money if you carry a balance or take out a loan. For instance, the Titanium Rewards Visa® Signature Card from Andrews Federal Credit Union offers variable APRs as low as 9.49% and no greater than 16.49%.
  • Higher interest rates on deposits: You can even receive a higher yield on deposits made to a credit union account, which can then add up to earning more money on your savings.
  • Lower fees: Credit union products can then often have the same fees as banks, but they might come at a lower price. And also some credit unions may waive certain fees on bank accounts and credit cards. The Platinum Mastercard® from First Tech Federal Credit Union has a $0 balance transfer fee, where the most cards from major banks charge 3% to 5% per transfer.
  • Personalized customer service: Since the credit unions are typically smaller than banks, they have fewer customers. And also since local credit unions were often founded to serve a particular community, they then have a reputation for providing more personalized and also responsive customer service.

Disadvantages of Credit Unions

While credit unions have many advantages, there are a few cons to consider:

  • Membership is required: Credit unions simply require membership that might be a hassle if you do not meet eligibility requirements and do not want to pay to become a member.
  • Fewer product offerings: You might not have access to as many financial products with a credit union compared to a bank.
  • Limited branch locations: Since credit unions are often local to a specific community, there are also a limited number of physical locations. This can then pose a problem if you want to visit a branch while traveling, or if you are a member who does not live near the community. To remedy this, some credit unions partner with others across the country to then lessen the burden of out-of-network ATM fees and also then give you a safe place to make deposits, but it is not exactly the same as opting for a bank that operates globally.
  • Less innovative technology: Credit unions are simply nonprofits, so they might then have a smaller budget for new websites or app features, which may then result in less advanced technology compared to big banks.

FAQs

Is A Credit Union Safer Than A Bank?

Why are credit unions simply safer than banks? Like banks, which are federally been insured by the FDIC, credit unions are simply been insured by the NCUA, making them just as safe as banks. The National Credit Union Administration is also a US government agency that regulates and supervises credit unions.

Is Joining A Credit Union A Good Idea?

Better Rates on Loans and Savings Accounts Because they don’t have to pay profits to shareholders as banks do, credit unions often can pass that money on to their members, by offering higher APYs on savings accounts and CDs and lower APRs on loans.

What Is The Downside Of A Credit Union?

Limited accessibility. Credit unions tend to have fewer branches than traditional banks. A credit union might not even be close to where you live or work now that could be a problem unless your credit union is part of a shared branch network and/or a large ATM network like Allpoint or MoneyPass. Not all credit unions are alike.

Which Is Better Credit Union Or Bank?

Credit unions typically offer lower fees, higher savings rates, and also a more hands-and personalized approach to customer service to their members. In addition, the credit unions might even offer lower interest rates on loans. And, it might be easier to obtain a loan with a credit union than a larger impersonal bank.

What Is The Main Purpose Of A Credit Union?

Like banks, credit unions do accept deposits, make loans and also even provide a wide array of other financial services. But as member-owned and also cooperative institutions, credit unions simply offer a safe place to save and borrow at reasonable rates.

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