1. What is a Credit Union?
A credit union is a member-owned financial institution controlled by its members, who conduct the business of the credit union. A primary difference between credit unions and other types of financial institutions (such as banks or savings and loan associations) lies in the fact that only individuals who are members may obtain loans from, or deposit accounts at, a credit union.
2. What are the benefits of credit unions?
A primary benefit is that, in most cases, credit unions offer lower loan rates and higher savings rates than other financial institutions. Members also enjoy various perks such as free checking accounts, discounted automobile insurance through local agents who participate in the credit union’s program, low-cost travel packages, and lower fees on services such as money transfers.
3. How to join a credit union?
Joining a credit union is easy if you are eligible for membership under the Federal Credit Union Act (FCUA). Eligibility requirements vary slightly from one financial institution to another, but most require that you be employed by a company that has an existing relationship with the financial institution, be a member of a labor union associated with the institution, attend school (which may include adult education programs), live or work in certain geographical areas, or belong to an association. You must also meet minimum requirements set by the financial institution — for example, you might need to maintain a minimum balance in your savings account.
Credit unions are legally obligated to serve all persons who are eligible for membership according to the FCUA, so they cannot refuse membership based on race, color, creed, national origin, gender, or physical handicap. Some credit unions limit their membership through other means — for example, by asking members to share a common bond, such as belonging to the same organization.
4. How is a credit union different from a bank?
A major difference between credit unions and banks is that credit unions are non-profit financial institutions. On the other hand, banks and thrift institutions usually return savings to shareholders as profits and dividends or invest them in loans that generate interest income for those members who deposit money in an account.
5. How is a credit union different from a regular bank?
A primary difference between credit unions and regular banks is that the former are not-for-profit, non-stock corporations. Credit unions serve groups or associations of people that have something in common, such as students or employees of a company. Membership is voluntary and requires satisfying certain criteria.
6. Pros and cons of joining a credit union?
There are many Pros and Cons of a credit union:
Pros:
- Credit unions offer better terms on loans and lower fees than banks.
- Because credit unions are smaller than traditional banks, they can provide more personalized customer service and focus on their members’ needs.
- A major perk is that most credit unions are required to protect members’ deposits in the event of a bankruptcy or closure.
Cons:
- Credit unions provide fewer and more limited banking services than banks.
- Because they only accept small deposits, credit unions usually pay lower interest rates on savings accounts than traditional banks.
