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across the country. For the most part, credit unions offer the same financial products and services as banks, but since they’re member-owned and smaller than most banks, they can offer better rates and more personal customer service. All credit unions have eligibility requirements that are usually based on a consumer’s affiliation with an employer, school, church or other organization, but some credit unions will qualify anyone who makes a small more
donation to a particular charity. Click “only show my eligible credit unions” to find those you’re qualified to join. If personal service is a priority, don’t overlook small community banks
which generally offer similar levels of customer care. Do you still have questions about credit unions? Scroll down to the Expert’s Answers below. And if you’ve done business with a credit union in the past, please take the time to rate it in order to help others in their search. less
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How Are Credit Unions Different from Banks?
If you need to set up a deposit account or take out a loan, you’ll need to decide whether to use a bank or a credit union
. Both institutions provide consumers with deposit accounts and loans, among other services. And with few exceptions, both banks and credit unions provide federal insurance coverage for deposit accounts up to $250,000 per depositor, per institution.
On the surface, banks and credit unions look pretty similar. So what are the major differences?
- Mission: Banks are profit-making enterprises. Just like any other corporation, banks use those profits to strengthen the company, provide bonuses to executives, and pay dividends to the shareholders. Credit unions, on the other hand, are not-for-profit organizations. The focus of a credit union is not on maximizing profit, but on supporting the community by providing members with the best possible products and services at the lowest possible cost. Any surplus income earned is returned to the members in the form of dividends.
- Ownership: Banks are owned by shareholders, while credit unions are member-owned. Credit union membership is made up of the credit union’s own depositors and borrowers, and is based on a community of some type, such as a common location, profession, church, club, or military affiliation.
- Eligibility: Banks are open to all customers, while credit unions are chartered to serve particular communities, and are required by law to restrict membership to those communities.
What Are the Advantages and Disadvantages of Credit Unions?
Advocates of credit unions are not afraid to mince words when it comes to cataloging the many advantages of credit unions. And you won’t have to look far to find those advocates. Here’s what they’re saying:
- As not-for-profit organizations, credit unions are under no pressure to increase shareholder value by pinching customers with excessive fees or reduced service. The shareholders of a credit union, in fact, are the customers, so what’s good for one is good for the other.
- The community orientation of credit unions allows them to promote local interests and target customers that are ordinarily underserved by financial services, particularly low-income groups.
- According to data published by the National Credit Union Administration (NCUA), the average interest rates for both depositors and borrowers tend to be more favorable for credit union customers than bank customers.
Of course, nothing is ever as simple as you want it to be. Before you swear off banks entirely, consider the following:
- The interest rate advantage that credit unions tend to have over banks is not absolute. That is, not all credit unions can offer rates on all products that are better than what’s offered by all banks. If your first priority is to find the best rate, it pays to shop around at both credit unions and banks.
- You might have to work a little harder to find a credit union than a bank. Because credit unions serve specific communities, members must meet certain criteria, or fields of membership. This isn’t as difficult as it sounds. There are dozens of different fields of membership, and numerous ways of qualifying for each one. However, securing membership does represent an extra step that is not required when using a bank.
- Because banks are more likely than credit unions to be vying for your business, they are also more likely to be engineering perks to lure you in and keep you. Rewards on cards, introductory rates, mobile features, and ATM networks are all likely to be more highly developed by the major banks.
Choosing between a credit union and a bank can be as much about personal values as about rates, services, and convenience. And it may be that no list of pros and cons will be enough to tilt the scale one way or the other. Any consumer will have to agree, though, that it is good to have a choice.
How Do I Find the Right Credit Union?
For some, the most daunting aspect of becoming a credit union customer is finding and joining the right institution. You may assume that if you don’t belong to an obvious field of membership—such as a military branch or a labor union—you’re not eligible to join a credit union. Make no such assumption. The National Credit Union Administration (NCUA) asserts that anyone can join a credit union, and there are dozens of fields of membership—from professional affiliations to geographic locations to churches.
You may be eligible to join a credit union even if you don’t belong directly to its given field of membership. For example, you don’t have to live within the boundaries of a location-based credit union—it’s enough to work or worship there. Your company might not have its own credit union, but its employees may be welcome at the credit union of an affiliated or neighboring company. And credit union membership is often open to the siblings, children, and parents of current members.
A credit union search tool can help you narrow down the field. Once you’ve selected some likely candidates, you can read through their material or contact them directly to find out whether you qualify. According to the NCUA, it will probably cost about $5 to $10 to purchase a credit union share. Once that’s done, you will be able to take advantage of all the services the credit union offers. In addition to that, you’ll be one of the owners of a community-based, communally-owned financial institution. For many consumers, that is worth the effort.