What is a credit union?
A credit union is a not-for-profit financial cooperative made up of people who share a common connection such as employment, membersip in an association or place of residence. Credit unions offer the same consumer services as banks, including checking and savings accounts, mortgages and personal loans.
How are credit unions different from banks?
Banks are built on a for-profit business model, designed to return their earnings to the shareholders who have invested in the bank. Credit unions, on the other hand, espouse a cooperative business model and because of this, they return their earnings to their members in the form of better interest rates on savings and loans, and fewer and lower fees. As a financial cooperative, credit unions do not have shareholders. They are owned by their members, those who use the credit union to do their banking. All members of a credit union have an equal say in electing the board and only members may serve on a credit union’s board of directors.
Are credit unions subject to the same federal regulator that oversees banks?
Credit unions with a federal charter are regulated by their own federal regulator, NCUA, the National Credit Union Administration. State-chartered credit unions are overseen by their state’s regulatory agency. This is why some are called a Federal Credit Union; they operate under a federal charter.
Are credit union accounts insured?
Credit unions are covered by the National Credit Union Share Insurance Fund (NCUSIF). It insures deposits up to $250,000, and your money is every bit as safe in a credit union as it is in a bank.
Don’t you have to belong to a specific group to become a credit union member?
Yes, credit unions are based on group affiliation – but those groups are a lot bigger and more inclusive than they used to be. Many employment-based unions are open to employees’ family members, for example. Some credit unions only require you to live in a certain geographical area. Not everybody can join every credit union, but just about everybody can find one that he or she can join.
What if I lose my eligibility? If I belong to an employee credit union, what happens if I leave my job? Do I have to quit the credit union?
Not at all! Once you are a member, you can keep your membership no matter where life takes you, as long as you keep your account in good standing and don’t do anything to harm the credit union.
Will I be able to access my accounts through a branch or ATM?
Because credit unions cooperate with one another, many make their ATMs available to members of other credit unions – surcharge free! In fact, there are about 30,000 such ATMS around the country.
What does it cost to become a member? Do I need to maintain a minimum balance?
You can open an account at most credit unions for as little as $25. Some only ask for $5! For interest-bearing accounts, you may need to keep a minimum balance, but these are usually much lower than what banks require. Many credit unions also offer no-fee, no-minimum-balance checking accounts.