What is a Credit Union?

What is a Credit Union: How to Find the Best Option for You

Credit unions are financial institutions that offer consumers an alternative to banks, often with more competitive rates and less or lower fees. That’s basically what a Credit Union is.

However, Finding the best credit union for you depends on multiple factors, including whether you are eligible to join, whether the credit union is convenient for your banking tasks, and whether it provides the financial services and products you need.

Here’s everything you need to know about finding the best credit union for you.

It’s important to find a credit union you can trust, they are a valuable resource in the world of pesronal finance.

It’s important to find a credit union you can trust, they are a valuable resource in the world of pesronal finance.

What Is a Credit Union?

A credit union is a member-owned, not-for-profit organization. Credit union members are generally connected via an employer, group affiliation or geographic area. A credit union serves its members by providing financial services, such as accepting deposits and making loans.

A credit union returns its profits to members by reducing fees, lowering loan rates and offering higher savings rates. Credit unions are considered a secure option for saving and borrowing at fair rates.

What Is the Best Credit Union to Join?

Even though there are a large number of credit unions in the U.S., the best credit union to join is one that you can qualify for membership with that can also meet your specific financial needs. Here are a couple of other factors to consider when looking for the best credit union to join.

A Credit Union That Is Federally Insured

All federal credit unions are federally insured, which means that all deposits are backed by the United States government. Federally insured credit unions are required to display an NCUA insurance sign where deposits are received — whether at a physical branch location or online deposit webpage.

Some deposits at state-chartered credit unions, however, are insured by private insurers, which means your money will not be federally insured or backed by the United States government.

A Credit Union That Is Convenient for You

If you desire an in-person banking experience, it’s helpful if the credit union you join is near you. A credit union branch close to your home or office allows you to conduct transactions conveniently. If having a physical branch to visit is not a dealbreaker, however, there are plenty of online-only credit unions to choose from as an alternative.

To locate a credit union near you, use the National Credit Union Administration’s Credit Union Locator tool.

How Do I Choose a Credit Union?

Once you determine which credit unions you are eligible to join and are convenient for you to use, compare the financial products and services offered by each one. Unfortunately, some smaller credit unions offer limited products and services, so it’s a good idea to shop around to find a credit union that offers exactly what you want.

Here are some factors to consider when choosing a credit union:

  • Whether it’s federally insured

  • Amount of membership fee

  • Amount of account fees

  • Savings and lending rates

  • Amount of ATM fees

  • Whether deposit insurance is offered

  • Whether there are online banking services

  • Whether there’s a mobile app

  • Whether there’s a credit card rewards program

You can find detailed information about credit unions you are interested in by using another NCUA tool: Research a Credit Union.

What Are the Advantages and Disadvantages of Credit Unions?

Before joining a credit union, it can help to examine the advantages and disadvantages of credit unions as compared to banks. Here are some to consider.

Credit Union Advantages*

  • Controlled by a board of directors who exist to serve the members who elected them

  • Typically offer lower fees than banks do

  • Typically offer lower interest rates on auto, home and personal loans than banks

  • Typically offer higher interest rates for deposit accounts than banks

  • May have more flexible lending guidelines than banks

  • Often offer more personalized service than banks

Credit Union Disadvantages

  • Membership requirements non-negotiable

  • Possible fee to join, although may be nominal

  • May not offer a full suite of financial products and services

  • May not offer a credit card rewards program

  • Possibility of limited branch locations

  • Possibility of limited ATM locations

  • Online banking and mobile app capabilities may be limited or offer fewer options than banks

Finding the Best Credit Union for You

As soon as you find a credit union you’re eligible to join that’s convenient for you to bank with, it’s important to examine your priorities. For example, are you looking for a credit union that has physical branches close by? Or is an online-only credit union acceptable? Do you want the option of getting a mortgage loan or a rewards credit card or are you just interested in putting money in savings?

Once you sort out what’s important to you, it will be much easier to find your perfect credit union match.

*EDITORS NOTE: fees and interest rates vary widely and overlap within and between both the credit union and banking industries.

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Cynthia Measom - is a Texas-based writer specializing in finance, business, parenting and education. With almost a decade of online writing experience, her work has appeared on websites such as Chron.com, The Bump and The Motley Fool. Measom received a Bachelor of Arts in English from the University of Texas at Austin.