What Accounts Are Available at a Credit Union?

Credit unions are financial institutions that are not-for-profit entities, owned by their members, and focus on serving those members rather than generating profits for shareholders. This cooperative structure often translates into benefits such as lower fees, more competitive interest rates on loans, and higher dividend rates on savings products. Unlike banks, credit unions are federally insured by the National Credit Union Administration (NCUA), providing deposit insurance coverage of up to $250,000 per depositor.

Everyday Banking Accounts

Credit unions provide accounts for daily financial management. The primary savings account is known as a Share Savings Account, representing a member’s partial ownership in the credit union. Opening this account is often a prerequisite for membership, requiring a small initial deposit. These accounts allow members to earn dividends on their balances, which are distributions from the credit union’s earnings. Funds are accessible through in-branch transactions, online banking, mobile apps, and ATM networks.

For day-to-day transactions, credit unions offer Share Draft Accounts, which function much like checking accounts. These accounts enable members to write checks, use debit cards, set up direct deposits, and utilize online bill pay services. Share Draft Accounts feature no monthly service fees and do not impose minimum balance requirements. Overdraft protection options are available, often allowing members to link their Share Draft Account to their Share Savings Account to cover transactions and avoid fees.

Savings and Investment Accounts

Beyond basic savings, credit unions offer accounts designed for accumulating larger sums or for specific investment strategies. Money Market Accounts (MMAs) combine features of both savings and checking accounts, typically offering higher dividend rates than standard savings accounts. These accounts often feature tiered rates, meaning higher balances can earn higher dividend yields. While MMAs provide more transactional flexibility than a basic savings account, such as limited check-writing privileges and debit card access, they usually have restrictions on the number of withdrawals per month.

For members seeking a guaranteed return on funds they do not need immediate access to, credit unions offer Certificates of Deposit (CDs), often referred to as “share certificates.” These accounts involve depositing a fixed sum for a specific term, commonly from three months to five years. In return for committing funds for the duration of the term, the account earns a fixed dividend rate, which is generally higher than rates on standard savings accounts. However, withdrawing funds before the maturity date incurs an early withdrawal penalty, which may involve forfeiture of a portion of earned dividends.

Retirement Savings Accounts

Credit unions provide options for long-term retirement planning through various Individual Retirement Accounts (IRAs). Two common types are Traditional IRAs and Roth IRAs. These accounts allow individuals to save for retirement with potential tax benefits.

Traditional IRAs offer tax-deferred growth, meaning earnings are not taxed until withdrawn in retirement. Contributions to a Traditional IRA may be tax-deductible in the year they are made, depending on income and participation in other retirement plans. Withdrawals from a Traditional IRA are taxed as ordinary income in retirement, and required minimum distributions (RMDs) begin at age 73.

Roth IRAs are funded with after-tax dollars, meaning contributions are not tax-deductible. Qualified withdrawals in retirement, including both contributions and earnings, are entirely tax-free. Roth IRAs do not have required minimum distributions for the original owner, providing flexibility in retirement planning.