Credit Unions and banks provide almost identical services. Both types of financial institutions provide for savings and checking accounts, provide customers with mortgages, car loans and personal loans, provide credit and debit cards. Customers can bank online and arrange for direct deposit with credit unions. Accounts at both types of institutions are insured. Credit unions even have business accounts. However, most times the costs of doing business with a credit union are much less than the costs of a bank.
What Is a Credit Union?
The reason for this is not very puzzling. Credit unions are financial cooperatives owned by their members. In order to open an account at a credit union you have to qualify for membership. Since credit unions are member owned, their reason for being is customer service – not profits.
It is true that credit union’s management staff is similar to that of banks. However, volunteers elected from the membership provide governance of credit unions. While the board of directors must protect the assets of the credit union, make sure that the credit union stays in compliance with regulatory authorities and follows all laws applicable to operating a business, the biggest difference between a credit union and a bank is the lack of profit motive. Members are interested in favorable rates, not so much in profits. Credit unions are less expensive on loan rates, have less expensive fees and are more likely to take additional yet reasonable risk with their member/customers.
Another difference between credit unions and for profit banks is that credit unions include in their charters and mission statements the understanding that managing finances can be challenging and that they educate members on good personal financial practices.
Lastly, any profits earned by the credit union go to the members as dividends.
Credit unions are federally insured; however, the National Credit Union Administration (NCUA), an independent agency of the federal government instead of the Federal Deposit Insurance Corporation, insures them.
Becoming a Member
So, credit unions sound like a pretty good deal, how does one become a member ? Under current federal law credit unions are not permitted to serve the general public. People gain eligibility to join a credit union through organization affiliations such as a religious affiliation or social group membership, through their employer or industry or through a community-chartered credit union.
If you have a job, check with your human resources department to see if the company or industry you work in has a credit union affiliation. If you are not eligible through your job, you may be eligible through your religious congregation or a social group you to which you belong. Most likely the easiest way to find a credit union is to use the Credit Union Look Up Tool. Simply fill in your address and it will return every credit union in your area with the requirements for membership.
This is a tool provided by the National Association of Federal Credit Unions. Using the tool means that all credit unions you find on the site are members and have deposit insurance from the NCUA.