What Is a Credit Union?

Curious about credit unions and what they can do for you? A credit union is a community-owned bank that provides regular banking services.

It's not out to make a profit and gives any extra money back to its members in the form of lower borrowing rates, and sometimes higher interest on deposits. You'll find out the essentials about credit unions, who can join them, and how they're different from regular banks.

Key takeaways

• Credit unions are like community banks owned by the people who deposit with them
• They usually provide better interest rates on savings and loans than banks
• They offer the same safety for your money as the FDIC gives to bank customers, insured by the NCUA

What is a credit union?

A credit union is a type of financial institution that’s owned and controlled by its members. Unlike banks, credit unions are not-for-profit, which usually lets them offer higher interest rates on savings and lower rates on loans.

How do credit unions operate differently than banks?

Here's how it works: members put money in, and that money supports loans and other financial services for everyone in the group. The cool part is that all the money the credit union makes goes back into making things better for the members—helping everyone's finances in the community.

Here is a summary of a credit union’s features:

• Not-for-profit structure
• Earnings are recycled back for member benefits and often focus on financial literacy
• Membership-based, usually with a common bond, like an employer or a region

While being part of a financial community comes with plenty of benefits, there are some downsides to the credit union structure. For example, many credit unions lack a nationwide branch or ATM presence, since they usually focus on a specific region.

Since I travel around the country frequently, that means a credit union just isn’t the right fit for me. While I’m better served by a major bank, that might not be true for you. Remember, making good financial decisions is about weighing the costs and benefits of your unique situation.

What membership requirements exist for credit unions?

Credit unions used to be exclusive, but now many welcome a large swath of people. This is why credit union customers are not called “customers”, but rather, “members” - it’s just like a club.

Still, some may have specific requirements. Let's check out the membership details.

• Originally, they were for specific industries or communities, but now they're more open.
• You can usually join by opening an account, often with a small initial deposit.
• Once you're a member, you get to vote in elections for the board of the credit union. Board members help manage the institution and make decisions on behalf of members.
• If you cannot qualify for membership based on your community or affiliation, some credit unions will allow you to join a partner foundation, like the American Consumer Council, for a small fee (anywhere from $5-$10) in order to gain membership

How does one become a member of a credit union?

Ready to join a credit union? Joining one is actually simpler than it sounds.

1. Find a credit union that matches your values or is close to where you live.
2. Make sure you fit their "field of membership" requirements, which means you can qualify as part of their member group.
3. Apply to become a member. Just share some personal info and make an initial deposit. That's it!

Do’s and don'ts of joining a credit union

When considering a credit union for your banking needs, it's critical to weigh the benefits against the drawbacks. Here's a handy table to guide your decision-making process.

Advantages and disadvantages of credit unions

Deciding to join a credit union has its own pros and cons. It's a bit like picking between a meal made at home and one from a restaurant.

With a credit union, you get personal attention and customized services, but there might be fewer options compared to other places. Let's take a look at the differences between the two.

Advantages of banking with credit unions

• Usually higher interest rates on savings
• Generally lower loan rates and service fees
• More creative loan structures and deals
• Profit-sharing among members
• A community-centric approach
• Equal voting rights for all members

Disadvantages of banking with credit unions

• Fewer branches and ATMs, which can affect access
• Potentially less cutting-edge technology
• Smaller basic product offerings
• More limited customer service hours

Why trust TuitionHero

At TuitionHero, we simplify college financial planning by combining our expertise with the support of credit unions. We specialize in private student loans, refinancing, and FAFSA assistance to prioritize our members' needs. Our resources offer better rates and community-driven support, enhancing the academic experience for students and parents.

Frequently asked questions (FAQ)

How does credit union membership support my educational financial planning?

Being part of a credit union can help you with your college finance plans. Credit unions often offer lower loan rates and better savings than banks.

This can make it easier for you to handle education loans and save more money for tuition. Joining a credit union might also connect you with a helpful financial community, supporting TuitionHero's goal to ease the financial burden of education.

Can I use credit union services for tuition payments and textbook purchases?

Yes! You can use credit union services for managing different college expenses, like paying tuition and buying textbooks.

Credit unions offer things like personal loans and checking accounts that come in handy for these needs. Also, the personalized customer service at a credit union helps you customize these services to fit your specific educational needs.

What should I look for in a credit union if I want to prioritize my college finances?

When it comes to managing your money for school, consider a credit union with good student loan rates, flexible payment options, and helpful savings accounts. Make sure the credit union fits your financial goals and supports students and education. Some credit unions even offer scholarships, and you can check out TuitionHero for more scholarship resources.

Final thoughts

Before we finish, keep in mind that whether you're heading to college or just want a more personalized banking experience, credit unions are a different option compared to regular banks. They focus on the community, providing helpful financial tools and knowledge.

Take advantage of what credit unions and TuitionHero offer to guide your academic and financial path. Move forward with confidence, knowing these organizations prioritize your needs.

Source

• About Credit Unions | MyCreditUnion.gov
• Credit union - Wikipedia
• Credit unions in the United States - Wikipedia