Credit Unions are financial institutions that operate much like banks, but they are not-for-profit and owned by their members. They are governed by a board of directors, and each member has a share in the institution’s ownership.
They tend to offer better rates on savings and loans than other local banks, but not all credit unions have the same products or services. While the main difference between a bank and a credit union is that they are not-for-profit, there are a few things you need to know before you choose one over another.
Insurance: Federally insured credit unions are backed by the National Credit Union Administration (NCUA), an agency of the U.S. government that provides up to $250,000 of coverage per depositor, per insured credit union.
Tax-exempt earnings: Because they are not-for-profit, credit unions don’t need to pay corporate income taxes. Instead, profits go to the credit union’s members in the form of higher interest rates on savings accounts and lower fees on other financial products.
Membership requirements: Credit unions typically require that you live, work or have a family connection to a specific area or community. They may also limit membership to certain groups, such as a local church or labor union.
Personal connections: The members of a credit union often share a common bond and enjoy the benefits of being part of a cooperative institution. This makes them more loyal and less likely to leave the credit union when their needs change or they find another organization that offers a better deal on products or services.
Location: Credit unions tend to be local and regional, which means you can often access your account via a branch or ATM located in your neighborhood. If a credit union doesn’t have a branch or ATM in your neighborhood, it may partner with an organization such as Co-op that provides the technology to connect you with an array of branches and ATMs across the country.
Customer service: Many credit unions have excellent customer service departments that can be helpful in making your transactions smooth and easy. Some even provide a dedicated phone number or email address for customers to contact if they have questions.
Branches and ATMs: Credit unions usually have their own branches and ATMs, but they may also offer other banks’ ATMs. This is especially true when the credit union is part of the Co-op network, which has a large network of shared branches and ATMs.
Higher rates: A credit union’s focus on serving its members compared to banks, means it can offer competitive loan and savings rates. That’s why credit unions have higher average savings and CD yields than other banks.
NCUA insurance: Your deposits are federally insured up to $250,000 by the National Credit Union Administration, an agency of the U.S. government.
The main difference between a bank and a Credit Union is that they are not-for-profit, owned by their members, and not-for-profit means they can’t make a profit for shareholders. This enables them to offer a range of benefits and services that can be difficult or impossible for other institutions to provide.