A Credit Union is a not-for-profit, member-owned cooperative financial institution. Credit unions differ from banks in that they offer a range of financial services, such as checking and savings accounts, credit cards and loans for housing, vehicles and education. They also provide other services, such as investment accounts and financial counseling. Credit unions are regulated and chartered by the federal government, as well as many state agencies. They may be insured by the National Credit Union Administration (NCUA) or the Federal Deposit Insurance Corporation (FDIC).
The primary function of a credit union is to support its members’ financial needs. This is done by offering lower mortgage and loan rates, fewer service fees, and higher yields on savings and checking accounts. Unlike banks, which must distribute profits to shareholders, credit unions return these gains directly to their members in the form of higher dividends on shares and lower interest rates on loans. This model is what makes credit unions unique.
There are a number of ways to become a member of a credit union, though the exact requirements vary by each institution. The most common way to gain membership is through a field of membership, which can be defined by a geographic area; employer or association, such as a school or place of worship; or other specific group. In some cases, membership is limited to employees of a certain company or organization, a practice that is sometimes referred to as a “sponsor” arrangement.
Once you are a member, you can exercise democratic control over the institution by voting for its board and other committees. Volunteers, who are elected by the members and are charged with acting in their best interests, manage credit unions. The boards and committees must meet minimum legal and regulatory standards set by the NCUA, as well as any additional requirements set by the charter.
Aside from their differences in the way they operate, there are some similarities between credit unions and banks. Both offer a variety of products, such as checking and savings accounts, mortgages and other loans, credit cards and investments. They both have ATMs and branches in most locations, as well as online banking and mobile apps. Choosing which institution to use comes down to your individual needs and preferences.
Ultimately, the choice between banks and credit unions depends on what features you prioritize and how much you value customer service. Consumers who prefer the technology of modern banks may choose to stay with them, while those seeking a personalized experience might opt for a credit union. In either case, it is important to shop around to ensure that you are getting the best rates and services for your money. To make the most of your banking experience, be sure to compare savings and lending rates, credit card offerings and membership fees before making a decision. Then, you can bank with confidence knowing your funds are safe. And who knows — you might even find yourself recommending your local credit union to friends and family!