If you’re looking for a new financial institution, it’s important to weigh all the options. Traditional brick-and-mortar banks continue to be popular with customers, but with the advent of online banks, they certainly aren’t the only option.
Another option to consider? Credit unions. Credit unions are similar to banks in that they offer traditional accounts like checking and savings accounts, money market accounts and certificates of deposit. They also have great options for mortgages and auto loans.
And just as most banks protect your deposits of up to $250,000 with FDIC insurance, credit unions guarantee your deposits up to the same amount via National Credit Union Administration (NCUA) insurance.
So what’s the difference between credit unions vs. banks? Whereas banks are for-profit organizations, credit unions are member owned and not-for-profit.
Instead of being a customer, you’ll be an actual member of your credit union. That means you get to vote on who’s elected to the board of directors and collect annual dividends based on the credit union’s success.
Credit Unions vs. Banks
The biggest draws of credit unions over banks are higher payouts and lower costs. At credit unions, you typically get:
- Higher interest rates on checking and savings accounts.
- Lower or no monthly fees.
- Better auto, small-business and home loan rates.
Note: Online banks and credit unions typically offer even better interest rates than physical banks and credit unions due to low overhead.
Credit unions are also typically local organizations, meaning the money you invest there is more likely to benefit your immediate community.
But traditional banks aren’t without merits. Brick-and-mortar banks typically have:
- More advanced online and mobile banking.
- Better sign-up bonuses.
- More physical locations and a potentially larger network of ATMs.
- An easier process to join.
How to Join a Credit Union
By law, credit unions must have criteria for membership. If you don’t meet a credit union’s stated criteria, you can’t join.
Sound intimidating? Don’t sweat it. Many credit unions make the field of membership broad enough that almost anyone can find a way in. Here’s how to join a credit union.
Credit Union Eligibility
The easiest way to join a credit union is through your employer. Many local employers have agreements with area credit unions that allow their employees to join. If you leave that job down the road, you don’t have to forfeit your membership.
Credit unions are often community-based, meaning you just need to live in the right ZIP code to be eligible. If you still don’t meet the requirements for your preferred credit union, see if they offer membership to students at a particular university, members of a specific religious congregation or donors to certain charitable organizations.
When all else fails, reach out to your family members. If you’re related to a credit union member, the credit union will usually allow you to join. Even if your relative is not a member but meets the eligibility requirements, many credit unions will allow you to join.
Finding a Credit Union
The best way to find a credit union is to use the NCUA’s credit union locator tool, which allows you to search by location for a credit union.
After you find credit unions in your area, research each one online to determine which is best for you based on rates, branch locations and customer satisfaction ratings. You should also call each credit union to confirm you’re eligible to join.
FROM THE BANKING FORUM
How to Create an Account at a Credit Union
Once you have found a credit union that you are eligible to join, creating an account is just as simple as opening a bank account.
1. Bring documentation. To open an account, you will need to provide a valid ID, your Social Security card and proof of your address. You will also need to prove that you are eligible for membership; this could be as formal as providing a pay stub from an employer or as informal as letting them know you belong to a specific church.
2. Make a deposit. To open a checking or savings account, you’ll need to make an initial deposit. Typically, $5 should do the trick. This deposit demonstrates your participation as a member of the credit union; think of it as buying stock in a company, but instead you’re buying a share of the credit union. This money must stay in the account at all times.
3. Start banking. Once you’ve created your account(s), you can set up direct deposit and auto payments, link your account to external bank accounts, order your checks and debit card, and apply for a credit card or loan.
Don’t forget to be active in your credit union by exercising your right to vote on the leadership you believe will grow your money the best.
Timothy Moore leads a team of editors and graphic designers at a market research company as his full-time gig. As a freelance writer, he writes about personal finance, careers, education, pet care, travel and the automotive industry. His work has been featured on Debt.com, The Ladders, Glassdoor and The News Wheel.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
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