What Is a Credit Union?

A credit union is a type of financial cooperative th🔯at provides traditional banking services. Ranging in size from small, volunteer-only operations to large entꦜities with thousands of participants spanning the country, credit unions can be formed by large corporations, organizations, and other entities for their employees and members.

Credit unions are created, owned, and oper❀ated by their members.🍒 As such, they are not-for-profit enterprises that are accorded tax-exempt status.

Understanding a Credit Union

Credit unions follow a basic business model. Members pool their money (technically, they are buying shares in the cooperative) to provide loans, demand deposit accounts, and other financial products and services to each other. An💟y income generated is used to fund projects and services that will benefit the community and the interests of members.

Requirements for Membership

Originally, 澳洲幸运5官方开奖结果体彩网:membership in a credꦦit union was limited to people who shared a common bond. They may have worked in the same industry or for the same company. Or they may have lived in the same community.

However, credit unions have loosened the restrictions on membership and ofꦗten allow the general public to join.

To do any business with a credit union, you must join it by opening an account 💞there (often for a nominal amount). As soon as you do, you become a member and partial owner.

That means you participate in the union's affairs. You may vote to determine the board of directors and decisions concerning the union. A member’s voting right is not based on how much money is in their account; each member gets an equal vote.

According to the 澳洲幸运5官方开奖结果体彩网:National Credit Union Administration 🍸(NCUA), membership in federally insured credit unions grew to 136.6 million as of March 31, 2023.

Advantages of Credit Unions vs. Banks

Non-Profit Status

As with banks, the pro🎉cess of making money at credit unions starts by attracting deposits. In this, credit unions have two distinc꧙t advantages over banks, both resulting from their status as nonprofit organizations:

1. Credit unions are exempt from paying corporate income tax on earnings.
2. Credit unions need to generate only enough earnings to fund daily operations. As a result, they can work with narrower operating margins than banks, which are expected by 澳洲幸运5官方开奖结果体彩网:shareholders to increase earnings every quarter.

Better Rates and Fees

The p🏅rofits that credit unions do make are used to pay members higher interest rates on deposits, and to charge lower fees for services, such as checking accounts and ATM withdrawaꦐls. In short, a credit union can save members money on loans, deposit accounts, and savings products.

According to NCUA data as of March 31, 2023, the national average rate for five-year 澳洲幸运5官方开奖结果体彩网:certificates of deposit (CDs) offered by credit unions was 2.66%, compared to an average rate of 1.83% offered by banks.

澳洲幸运5官方开奖结果体彩网:Money market rates at credit unions were also higher, with an average rate of 0.53% versus the average bank rate of 0.43%.

W𒁏hile these differences sound small, they do add up, giving credit unions a significant advantage over banks when competing for deposits.

Disadvantages of Credit Unions vs. Banks

Fewer Locations

Credit unions have considerably fewer brick-and-mortar locations than most banks♚, which 🐷can be a drawback for clients who like in-person service. Most offer modern services such as online banking and auto-bill pay. Still, the small size of many credit unions can mean a compromise on accessibility.

Lower Tech

Smaller credit unions typically do not have the same technology budge✤t as banks, so their websites and security features are often considerably less advanced. That said, some mid-sized and larger credit unions may offer mobile banking apps that rival those of much bigger, for-profit institutions.

Limited Products and Services

While credit unions offer most of the financial products and services that banks do, they often provide less choice. Bank of America has 20 different credit card options, ranging from rewards cards to student cards, while the Navy Federal Credit Union (NFCU) has only six. The second-largest credit union in the country, the 澳洲幸运5官方开奖结果体彩🐎网:State Employees’ Credit Union🀅 (SECU), offers one credit card.

Less Flexibility

With more resources to allocate to customer service and personnel, banks are keeping later and longer hours. You may find them open until 5 p.m. or 6 p.m. on weekdays and often on Saturdays, as well. Credit unions tend to maintain traditional bankers' business hours (9 a.m. to 3 p.m., Monday through Friday), though the larger ones, such as SECU, have a 24-hour customer service hotline.

Insurance on Credit Union Accounts

The 澳洲幸运5官方开奖结果体彩网:Federal D❀eposit Insur☂ance Corporation (FDIC) does not cover credit unions. However, the NCUA, which was established in 1970 and regulates 澳洲幸运5官方开奖结果体彩网:federally chartered credit unions and most state-chartered credit unions, does provide account protection.

In fact, one of the NCUA's main responsibilities is to administer the National Credit Union Share Insurance Fund (NCUSIF), which uses federal monies to back up shares (deposits) in all federal credit unions.

The NCUA provides coverage for each individual account, joint account, trust account, retirement account (such as 澳洲幸运5官方开奖结果体彩网:traditional IRAs, Roth IRAs, or Keogh plan accounts), and business account for up to $250,000 per account.

For example, if you have an individual account, a Roth IRA, and a business ac෴count at a credit union, your ཧtotal shares are insured up to $750,000.

You can research credit unions of interest that the NCUA regulates at the website.

The Bottom Line

Credit unions are significantly smaller in size than most banks and are structured to serve a particular region, industry, or group. And though they may have fewer branches, they can still provide customers ample access to thei🧜r funds as many credit unions are part of expansive ATM networks.

While credit unions must make enough to cover their operations, any profit beyond that goes back to the members in the form of lower fees and account minimums, higher rates on🐓 deposits, and lower borrowing rates.

Correction—Feb. 12, 2025: This article has been corrected to state that the NCUA was established in 1970.