A credit union is a financial institution that operates like a bank. While banks and credit unions have many similarities, there are a lot of things that make credit unions unique. Understanding how a credit union works can help you determine if a credit union is the right fit for your everyday banking needs.
What Is a Credit Union?
One of the defining characteristics of credit unions is that they are not-for-profit organizations where the members are the owners. Because a credit union is owned by its members, it prioritizes the experience and needs of each member and the community. Whatever profits a credit union makes are reinvested back into the credit union in ways that benefit its members, often in the form of better rates on loans, higher rates on savings, or advancements in banking technology.
What Kind of Accounts Can You Have with a Credit Union?
Credit unions often offer their members many of the same products and services as a traditional bank:
- Checking: Credit unions often offer a variety of checking products that help a member manage their everyday finances. A Free Checking account is a common type of checking account that offers no monthly maintenance fees. Some credit unions may offer high-yield checking accounts that give people the opportunity to earn dividends on their checking account balance when they meet certain requirements.
- Savings: Credit unions also offer members savings accounts that grow with interest. Most credit unions offer both a primary savings account and an additional savings account to let members save towards multiple goals. Some credit unions even offer high-yield savings accounts that may include industry-leading saving rates.
- Loans: Credit unions may be able to offer better rates on loan services because of their not-for-profit model. Members may be able to get better financing options on mortgage loans, auto loans, and more.
- Credit Cards: A credit card with a credit union has the potential to include services such as 24/7 Cardmember Service, mobile banking, and often promotional APR rates that benefit the cardholder.
What Are the Advantages of a Credit Union Membership?
Credit unions and banks have their differences, and there are several key advantages to being a member of a credit union. Because credit unions are member-owned cooperatives, many of the advantages to membership are a direct result of credit unions prioritizing the needs of their members.
- Competitive Rates: Because profits are reinvested into the credit union, credit unions often offer more competitive rates, including lower rates on mortgage, HELOCs, and auto loans and high rates on deposit products like high yield checking, savings, and share certificates (CDs).
- Member Service: Credit unions are owned by their members, so service is a high priority. Member service at credit unions is often personal, friendly, and prompt to ensure all member needs get met.
- Financial Education: When members have financial success, it makes the credit union stronger, so credit unions are committed to helping members achieve financial success through financial literacy initiatives, like personal finance educational platforms and budgeting tools.
How Do You Join a Credit Union?
There are membership requirements to join a credit union and use its products and services. Membership requirements allow credit unions to offer a more personalized experience tailored to the community's specific needs.
Everyone credit union has different membership requirements. To join a credit union, a potential member may need to meet one of the following items:
- Location: Some credit unions offer membership to those living or working in a specific geographical area.
- Profession: Members may need to work for a certain kind of company or be a part of a specific kind of organization.
- Connections: An aspiring member can join if they are connected or related to an existing member.
Most credit unions will offer specific information on their website to help potential members see if they qualify. If someone who is interested does not qualify, many credit unions offer alternative sign-up methods in exchange for a small fee or charitable donation.
Credit Union 1 is here to provide a better banking experience for all, with personalized member service, competitive banking and lending products, and free access to our financial literacy platform CU1 Financial Wellbeing. Open an account online and join our community today.