Choosing to deposit your money at a financial institution is a wise move. Not only do you benefit from having your money in a safe place, but you can also take advantage of a variety of financial products and services to help you manage your finances and live a better quality of life.
At the end of 2019, credit union memberships reached 122.5 million — equal to 37.2% of the U.S. population — according to a 2020 Credit Union Trends Report from the Credit Union National Association. And 3.96 million of those memberships were initiated in 2019.
If you’ve ever considered joining a credit union, why not now? Although you may be intimidated by the perception that you have to be part of an exclusive group to join a credit union, that’s not always the case. Plus, there’s no reason to part ways with your current bank if you decide to join a credit union.
Find out everything you’ve ever wanted to know about credit unions, including the best perks of joining.
What Is a Credit Union?
A credit union is a not-for-profit organization that focuses on serving its members. Members can make deposits, apply for loans and take advantage of various other financial products and services. Credit unions typically offer reasonable savings and loan rates.
The Best Perks of Joining a Credit Union
Credit Unions Are financial cooperatives and are generally governed by the seven principles of the International Co-operative Alliance, which are based on the values of fairness, equality and helping others.
The seven principles include voluntary membership; democratic member control; members’ economic participation; autonomy and independence; education, training, and information; cooperation among cooperatives and concern for the community.
When considering joining a credit union, it can be helpful to examine the advantages — many of which are based on the previously mentioned seven principles. Here are some of the best perks you can find at credit unions.
1. Great Financial Resources
Credit unions are dedicated to providing a leading source of financial information for their members to assist them in making smart financial decisions. As a credit union member, you’ll have access to a wide variety of information on various financial topics via in-depth articles, helpful tools and other valuable resources, such as seminars or workshops.
2. Better Interest Rates
If you already are an account holder at a bank, you may want to do some comparison shopping to make sure you’re getting the best deal on financial products. You’ll probably find that credit unions offer better rates on mortgages, auto loans, mortgages and credit cards, which can save you money.
3. Fee-Free Deposit Accounts
It’s not uncommon to find credit unions that offer fee-free checking and savings accounts that aren’t tied to conditions, such as maintaining a high daily balance. This perk is helpful if your balance often dips before your next paycheck hits. Then, you won’t be racking up fees of $5 to $25 per month, which can tally up to $60 to $300 per year.
4. Strong Community Presence
Because credit unions are invested in their members, they also invest in the communities where they are located. As a result, credit unions give back locally in the communities they serve. For example, credit unions may reward grants and scholarships to deserving local students or donate books to improve literacy.
Some credit unions also participate on a larger level, such as those who have an alliance with Credit Unions for Kids, which benefits the Children’s Miracle Network.
Credit Unions for Kids participates in fundraising to benefit 170 Children’s Miracle Network Hospitals. The full amount of every dollar donated by a credit union goes directly back to the Children’s Miracle Network Hospital that serves its community and members.
5. Insurance Coverage
Just like at banks, deposits up to $250,000 at most credit unions are insured — but not by the Federal Deposit Insurance Corp. Instead, insurance is provided by the National Credit Union Administration. To find out if a credit union’s deposits are insured by the NCUA, check the NCUA website. The credit union in question should also have a sign on display in its branches that state that it is NCUA- insured.
To determine which of your member share accounts are federally insured, use the NCUA’s share-insurance estimator. Note that mutual funds, stocks, bonds, annuities, and any investment that isn’t a share account are not able to be federally insured.
6. Membership Status
One of the biggest perks of joining a credit union is that you have a financial stake because of your membership status. Unlike banks, credit unions require members to deposit a small minimum amount into their accounts to secure their share. This share represents your financial ownership in the credit union.
As a member, you also get the perk of voting for the board of directors who will manage the credit union.
7. You’ll Become Part of a Financial Cooperative
When you join a credit union, you become part of a team that pools your money together to benefit each other’s financial needs. By providing the funds for loans to paying dividends to members, credit unions function as financial cooperatives.
And as more and more members open deposit accounts and get loans, the credit union will become stronger and be able to continually reinvest in its community. Reinvestment can take place in the form of providing better loan rates to help families and small businesses or through donations to local causes.
8. Less-Stringent Qualifications for Lending
If you’ve ever tried to get a loan from a bank, but were rejected, someone may have suggested you apply for a loan with a credit union. Credit unions are known for their more forgiving attitudes toward people who have a less-than-stellar credit history. Credit unions tend to look at more than just your credit score and payment history, and will often work with you to help you qualify for the loan or credit card you’re seeking.
Some credit unions, even have certified credit counsellors on staff to help educate consumers who are struggling with their credit. Services could include a free credit score analysis and suggestions for improving your credit score and getting out of debt.
Credit Unions vs. Banks
You may be wondering how a credit union differs from a bank. One of the biggest perks of choosing a credit union over a bank is that credit unions generally offer better rates on loans and credit cards.
For example, at the end of 2019, the national average rate for a 60-month new car loan at a credit union was 3.53%, while the national average rate for the same loan from a bank was 5.16%, according to the National Credit Union Administration. And the national average rate for a classic credit card from a credit union was 11.56%, whereas the national average rate at a bank was 13.56%.
Here are some additional differences in the features of credit unions and banks, presented side-by-side for you to consider.
Credit Unions vs. Banks
|Products and Services||Possibly fewer product and service offerings||Possibly more product and service offerings
|Interest Rates and Fees|
Lower loan and credit card interest rates and fewer fees
Higher loan and credit card interest rates and more fees
|Ownership||Members own shares of the credit union and have equal voting rights||Shareholders own bank and have voting rights equal to the amount of shares held|
|Deposit Insurance||NCUA-insured up to $250,000||FDIC-insured up to $250,000
|Profit Structure||Not-for-profit institutions||For-profit institutions|
|Surplus Earnings||Surplus earnings devoted to enhanced service offerings and deposit rates; decreased interest rates and fees||
Surplus earnings devoted to shareholder returns
|Service Area||Mostly local or regional||
Varies from community banks to national banks
|Eligibility Requirement||Membership requirements apply||Membership is not required to open an account a bank|
How To Find and Join a Credit Union
If you’ve decided that you’d like to join a credit union, you’ll need to find one that you can qualify to join. Once you determine that you meet the requirements, you’ll need to know how to join. Here’s the information you need to know.
How to Find a Credit Union in Your Area
Once you locate a credit union via the search tool, you can view its basic information. If you’re interested in more detailed credit union information, use the NCUA’s companion tool, Research a Credit Union. Or you can visit the credit union’s website to find out if you are eligible to join.
How To Join a Credit Union
Once you’ve found a credit union you’re interested in joining and you meet its eligibility requirements, you’ll need to apply to be a member. You may be able to find the application on the credit union’s website. If not, you can either call the credit union and ask how to apply to be a member or visit a branch in person.
Expect to make a minimum deposit of $5 to $25 when you open a new credit union account, according to MyCreditUnion.gov.
Things To Keep in Mind When Joining a Credit Union
Just like with any type of financial institution, joining a credit union has some potential disadvantages, which may or may not apply to you. Here are some things to keep in mind.
1. Limited Branches
Depending on the size of the credit union you join, there may be limited availability of branch locations. For example, some of the smallest credit unions may only have one or two branches. So when you travel out of your area, you won’t be able to visit a branch in person.
2. Limited Technology
Slick, eye-catching websites with user-friendly options are popular offerings from banks, but you may find that the websites of smaller credit unions aren’t quite as technologically advanced.
3. Limited ATM Locations
In-network ATMs may only be available at credit union branch locations. But you may be able to use ATMs at other financial institutions, and the credit union will reimburse you for any fees you incur up to a certain amount. But that’s not a given.
4. Limited Product Selection
If you’re looking for a financial institution that offers a full suite of products and services, a credit union may not be able to deliver. For example, a credit union may not have all the types of accounts you want or offer a variety of credit cards with attractive welcome bonuses and great rewards.
5. Strict Eligibility Requirements
Some credit unions require nothing more than a small deposit or a donation to become a member.
Others, however, often have strict membership guidelines such as:
- Being employed by a certain employer.
- Being a family member of someone who is already a member.
- Living, working, attending school or worshipping in a specific geographic location.
- Belonging to a church, school, labour union or other association.
Should You Join a Credit Union?
Whether or not you should join a credit union depends on your financial lifestyle and goals. For example, if you’re unhappy with your bank or you’re looking for forgiveness when it comes to lending decisions, a credit union could be right for you.
Start by looking at the credit unions near you, and find the ones you are eligible to join. Then compare the products and services to find the best fit for your financial lifestyle and goals. The larger a credit union is, the more likely you’ll get the products, services, and accessibility you desire.