What Are the Benefits of a Credit Union?
Learn why credit unions, as member-owned financial cooperatives, provide unique benefits for your money.
A credit union functions as a not-for-profit financial cooperative, accepting deposits, making loans, and providing a range of financial products and services. Unlike traditional banks, which are for-profit entities owned by shareholders, credit unions are member-owned organizations. This fundamental difference shapes their operations, focusing on serving the financial well-being of their members rather than maximizing profits for external investors.
Member-Owned Structure
Credit unions are distinct because their members are also their owners, rather than outside shareholders. This cooperative structure means that any earnings generated are reinvested into the credit union or returned to members, often translating into benefits such as reduced fees, higher savings rates, and lower loan rates. Members have a voice in how the credit union operates, participating in a democratic governance model where each member holds one vote, regardless of their account balance. Members elect a volunteer board of directors from among the membership, who oversee the credit union’s strategic direction and policies. This structure fosters a community-focused approach, prioritizing the financial success and satisfaction of its members.
Financial Offerings
Credit unions provide more favorable financial terms compared to many traditional banks. They offer competitive interest rates on deposit accounts, such as checking, savings, and certificates of deposit (CDs), and feature lower interest rates on loans, including auto loans, personal loans, and mortgages. This can result in considerable savings over the life of a loan. Beyond interest rates, credit unions have lower or fewer fees for various services, including reduced or eliminated monthly maintenance, overdraft, and ATM fees. Some credit unions offer checking accounts with no minimum balance requirements, passing value back to members and aligning with the cooperative’s not-for-profit mission.
Membership and Services
Becoming a member of a credit union involves meeting specific eligibility requirements. These include a common bond, such as living, working, or attending school in a particular geographic area, being employed by a specific company, or belonging to certain associations or groups. Once eligible, joining requires opening a savings account with a nominal minimum deposit. Credit unions offer a comprehensive array of financial products and services comparable to traditional banks, including checking and savings accounts, various types of loans, credit cards, and online and mobile banking capabilities. Deposits held at credit unions are federally insured by the National Credit Union Administration (NCUA) through the National Credit Union Share Insurance Fund (NCUSIF), protecting accounts up to $250,000 per depositor and providing similar security to FDIC insurance for banks.