RSS FeedWhat is the difference between a credit union and bank? You have no doubt seen credit union buildings around, or seen their ads. They sound like banks, but they don’t have the word “bank” in their name—just what are they?
Credit unions are not-for-profit organizations that are in business to serve their members (unlike banks, which are for-profit organizations). The governing board at each credit union is elected by its members to manage the credit union for the benefit of the members. Profits made by credit unions are returned back to members in the form of monetary credits (dividends), reduced fees, higher savings interest rates, and lower loan interest rates.
Federally chartered credit unions are regulated by the National Credit Union Administration and insured by the National Credit Union Share Insurance Fund, which is backed by the full faith and credit of the United States government. Before you join a credit union, check to see that they are indeed insured by the NCUSIF—they must display the official NCUA insurance sign in their offices.
If a credit union does not have the word “federal” as a part of its name and is not headquartered in Arkansas, Delaware, South Dakota, Wyoming, or the District of Columbia, then it is probably a state-chartered credit union, and the state supervisory authority where the credit union’s main office is located will usually be the regulator.
Credit unions are like banks in that members have checking and savings accounts. They also provide loans, and other financial services.
On average, credit unions offer higher saving rates and lower loan rates. This could help your savings grow faster and your loan cost less. Credit unions also tend to charge lower fees, require lower deposit balances and offer better service.
Who can join a credit union?
Just about anyone—you just have to fall into the credit union’s targeted group:
- Employer: Many employers sponsor their own credit union, or help sponsor a regional credit union.
- Family: If a family member is part of a credit union, you may be able to join as well.
- Geographic location: A credit union may choose to serve anyone who lives, works, or attends school in a specific geographical location or area.
- Membership in a group: If you are a member of a group, you may be eligible to join a credit union—this could include a labor union, a school, a place of worship, an employer, or a homeowners association.
- Military: If you are a current or former member of the military, you may be eligible to join a credit union such as the Navy Federal Credit Union.
For example, to join the CU Hawaii Federal Credit Union, you must fall in to one of the following groups:
- You live on the Island of Hawaii.
- You regularly work, attend school, worship, perform services, or participate in associations headquartered on the Island of Hawaii.
- You belong to an organization headquartered or maintaining a facility on the Island of Hawaii.
- You are a family member of a CU Hawaii member (you don’t have to live in the same household).
Small and local business support
Because they are locally based, and because frequently local businesses are members, credit unions are more focused on supporting their local small businesses. This can be in the form of more consideration for small business loans, auto loans, and even home mortgages, as well as other community support such as financial education. A local business will also get more personal attention at a credit union than at a national bank.
Is a credit union right for you?
Over 98 million Americans belong to a credit union. Is joining one right for you? Here’s a quick list of what they offer:
- Personal service
- Local and community interest
- Ability to vote on leadership
- Not-for-profit
- Fewer fees than a nationals or regional bank
- Direct deposit
- Financial education
- Multiple branches
- Electronic banking and ATMs
- Overdraft protection
- Loans: mortgage, home equity, small business, and auto
Credit unions are a safe place to have a checking account, to save, and to borrow at reasonable rates. You can find a credit union near you here.
