You can think of a credit union as an alternative to mainstream banking. And the fundamental difference between a bank and a credit union is the ownership structure. Banks are built for profit, while credit unions are cooperatives or non-profits. Empower Federal Credit Union is a perfect example of the cooperative model, where members elect a board of directors to oversee operations.
How Did Credit Unions Start?
Banks and credit unions started the same way. Towns or states chartered the first banks, while credit unions got their start from churches or labor groups. Both types of financial institutions allowed people to take small loans at a reasonable interest rate.
They both accepted deposits from customers who wanted quick access to their money without having to pay a fee. Banks and credit unions were both community-based, although banks would eventually expand into big corporations that didn’t care about their customer base as much as the bottom line.
Today, most banks are publicly traded companies with thousands of branches. On the other hand, there are over 12 thousand federally chartered credit unions, which is a testament to their popularity and usefulness.
What is the Difference Between Federal Credit Unions and Non-Federal Credit Unions?
The big difference between federally chartered credit unions and their non-federal counterparts is the way they’re insured. Federally chartered credit unions have to be members of the National Credit Union Administration (NCUA), so they fully protect all depositors up to $250,000 per account.
This type of insurance is not available to non-federally chartered credit unions, which means you stand to lose your deposits if the union goes down. It’s also worth noting that federally chartered credit unions are larger and have more branches than their non-federal counterparts.
What Services Do Credit Unions Offer?
The services offered by credit unions vary, but most of them offer a full range of banking products and services. This includes checking and savings accounts, loans, mortgages, and credit cards. And because they’re member-owned cooperatives, credit unions often have lower interest rates on loans and higher rates on deposits than banks.
They also offer other services that banks don’t, like bill pay, mobile banking, and peer-to-peer payments. So if you’re looking for a more affordable option than a bank, or you want to support a cooperative rather than a for-profit institution, credit unions are the way to go.
How Can You Open a Share Savings Account?
Opening an account at a credit union is as easy as showing up with some form of identification. But if you’re not sure where to find one, use the NCUA locator tool on their website. The process can be done online or in person, depending on your preference and how much access you want to have to your account.
Once your account is open, you can start depositing money and taking advantage of the products and services that credit unions offer.
How Is Eligibility Determined?
Eligibility for membership in a credit union is typically based on where you live or work, or what type of organization you belong to. For example, membership can be limited to people who live, work, worship, attend school, volunteer, or are employed by select groups in a particular area.
Some credit unions also offer membership to family members of current members. And a few allow anyone in the country to join if they’re willing to pay a one-time fee. So it pays to do some research before you decide which credit union is right for you.
Where Do Credit Union Profits Go?
One benefit of credit unions is that profits are returned to members as lower interest rates, higher dividends on deposits, and reduced fees. In fact, over 60% of all credit unions offer free checking accounts.
This is in stark contrast to banks, where profits go straight to shareholders. And because credit unions are not-for-profit institutions, they don’t have to pay out exorbitant salaries or bonuses to their executives.
How Can I Find a Credit Union Near Me?
You can find credit unions near you by searching online. There are also apps that make it easy to locate the closest branch no matter where you are, and many offer free or discounted products and services just for joining.
For example, some will waive your monthly service fee if you meet certain requirements or deposit a minimum amount each month. So it’s well worth your time to check out the benefits of credit unions versus banks, and maybe even join one today!