What Is a Credit Union?

Highlights:

• Credit unions are like banks and offer a variety of financial services.
• Credit unions are not-for-profit groups that are consumer-focused and for members only.
• Credit unions can be a great option for managing your money, but they have their pros and cons.

Credit unions, like banks, provide members with financial services. Both banks and credit unions offer checking and savings accounts. Most credit unions also offer mortgages and other loans. But credit unions differ from banks in a few key ways. Learn more about credit unions, their benefits, and if you should join one.

Pros of credit unions

There are many benefits of using a credit union.

• Lower interest rates on credit cards and loans. Banks are for-profit while credit unions are non-profit. Because they are non-profit, they can offer much lower interest rates and fees. This might include fees for credit card transfers or loans. Some credit unions may waive some fees completely.
• Personalized customer service for their community. Banks don't offer memberships, but credit unions do. Credit unions are very invested in the communities they serve. Some credit unions cater to the armed services. They tend to offer products for active-duty military members. The financial education many credit unions offer are also tailored to members' needs.
• Your deposits are safe and insured. Both credit unions and banks can insure deposits up to $250,000. The National Credit Union Administration backs credit union accounts. But the Federal Deposit Insurance Corporation insures banks.

Cons of credit unions

There are a few downsides of joining a credit union.

• Requirements may limit members. Credit unions often serve a specific location or community of people.
• Fewer Physical Locations. Credit unions may have fewer places where you can deposit funds or withdraw money.
• Fewer options and perks for credit cardholders. Banks often offer large sign-up bonuses or favorable cashback rates. Smaller credit unions may not be able to offer these.
• Limited access to online banking. Due to their smaller size, credit unions may not have the resources for online or mobile banking.

How to join a credit union

If you want to join a credit union, look for one that meets your specific needs. There are national and local credit unions. To join a credit union, you may have to pay a small deposit and a one-time membership fee. Keep in mind that not everyone qualifies for every type of credit union. Members must meet one or more common bonds, known as a “field of membership.” Some employers sponsor credit unions for their employees. You may also qualify based on your labor union, school or other organization. Many credit unions will also allow the family members of existing members to join. Some credit unions also offer membership if you live, work or attend school within a certain area.