Credit Unions are not-for-profit cooperative financial institutions that are owned by their members. Their profit goes back to their members in the form of lower rates on loans and higher deposit yields on savings products, such as share certificates (or CDs).
They offer a wide variety of services including regular and money market accounts, Certificates, personal, auto, mortgage and credit cards, online banking and mobile banking, and ATM networks. Their fees are usually fewer and lower than those charged by banks.
Their loan consideration is typically based on applicants’ character and capacity to repay the loan, and their loan rates are typically lower than those of banks. They also offer low or no interest on IRAs and 401(k) retirement plans.
Because they are not-for-profit, credit unions do not have to pay taxes on their earnings. They need to generate only enough profits to cover their expenses. This means they have narrower operating margins than banks, which need to generate more income every quarter in order to increase shareholders’ returns.
As a result, they can focus on providing products and services that are helpful to their members rather than on maximizing profits. They have a more personal touch when it comes to customer service and they often provide free financial education to their members.
You can become a member of a Credit Union by opening an account at a local credit union. Generally, the membership fee is between $5 and $25. However, if you’re interested in becoming a credit union member, it’s important to evaluate the product offerings and fees before making a decision.
In addition to offering a wider range of financial products and services, credit unions also have lower costs than banks and provide more personalized service. They also tend to be more community-focused, so their staff may have a greater understanding of the needs of the community they serve.
The downside to credit unions is that they often have fewer branches than banks do, so you might not be able to find a branch in your neighborhood or town. This can be a disadvantage, especially if you travel and need to access your accounts while you’re away.
Some state-chartered credit unions are not federally insured, so you should always check to see if your deposits are safe with the National Credit Union Administration. If they are, their deposits are protected up to $250,000 per depositor by the NCUA’s Share Insurance Fund.
They belong to worldwide support networks that include credit union leagues, a national trade association (CUNA) and shared branching and CO-OP ATM networks. These organizations help credit unions share ideas, information and resources.
Many unions focus on serving low-income communities and bringing them financial assistance to get them out of debt. This helps them reach underserved sections of communities where larger banks don’t often venture to.
Their in-depth knowledge of the community enables them to connect with people and give out loans at nominal interest rates, which can save them substantial interest that would otherwise be incurred by other financial institutions.