January 11, 2023
If you’ve always used the services of a traditional bank, you might not know the ins and outs of credit unions and if using one might be better for your financial situation.
Credit unions are generally known for their customer-focused operations and friendliness. But the main difference between a bank and a credit union is that a credit union is a nonprofit organization that you have to be a member of to participate in its services. Credit unions may offer higher interest rates and lower fees than banks, but banks may provide more services and a greater range of products.¹
Read on for some basics about what you should know before you join one.
Protection and insurance
Just like banks, your accounts at a credit union should be insured. The National Credit Union Share Insurance Fund (NCUSIF) functions to protect consumer deposits if the credit union becomes insolvent. The fund protects up to $250,000 per customer in deposits.² Be sure the credit union you select is backed by the NCUSIF.
What credit union is best for you?
Today there are many credit unions available. Many now offer 100 percent online banking so you may never need to visit a branch at all.
The most important feature in selecting a credit union is to make sure they meet your personal banking needs and criteria. Here are a few things to consider:
- Does the credit union offer the products and services you want? Can you live without the ones they don’t?
- Do they have competitive interest rates when compared to banks?
- Are the digital and online banking features useful?
- What are the fee schedules?
- What are the credit union membership requirements? Do you qualify for membership?
Take your time and do some research. Credit unions vary in the services provided as well as the fees for such services.
What to expect when opening a credit union account
Each credit union may have slightly different requirements when opening an account, but in general, you will most likely need a few things:
Expect to complete an application and sign documents. When opening a credit union account, you will likely have to fill out some forms and sign other paperwork. If you don’t understand something you are asked to sign, make sure you get clarification.
Be prepared to show identification. You will likely be asked to show at least two forms of identification when opening an account. Your credit union will also probably ask for your social security number, date of birth, and physical address. Be prepared to show proof of your personal information.
Make the required opening deposit. On the day you open your credit union account, you’ll likely be asked to make an opening deposit. Each credit union may have a different minimum deposit required to open the account. It could be up to $100 (or more), but call the credit union to make sure.
Credit union accounts offer some unique advantages for members. You may enjoy more comfortable access to personal loans or even auto financing and mortgages. Credit unions may offer other perks such as fee waivers, as well as discounts on other products and services that come from being a member.
If participating in a customer-owned bank sounds interesting to you, a credit union may be a good option. There are more credit unions available today than ever. Do your research. You may find an option that compares to your current bank, but offers some greater benefits that will make it worth the switch.
This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Any examples used in this article are hypothetical. Before investing or enacting a savings or retirement strategy, seek the advice of a licensed financial professional, accountant, and/or tax expert to discuss your options.
¹ “What is the difference between a credit union and a bank?” Christy Rakoczy Bieber, Credit Karma, Updated Aug 31, 2021, https://www.creditkarma.com/advice/i/difference-between-credit-union-and-bank/
² “Share Insurance Fund Overview,” National Credit Union Adminstration, Updated Aug 10, 2021 https://www.ncua.gov/support-services/share-insurance-fund