If you’re looking to open a new checking account or savings account, don’t limit yourself to banks. Instead, look into credit unions, which have various offerings.
What Are Credit Unions?
Unlike banks, credit unions are not-for-profit organizations. According to innovationcu.ca, “Credit unions have members, while banks have customers.” Instead, they are member-owned and operate under the principle of helping the less fortunate. At credit unions like Innovation, members earn Innovation member rewards. However, a potential member needs to purchase a share of the credit union to access the benefits.
Many people think that because credit unions are smaller, they aren’t as powerful as the bigger banks. However, this is a common misconception. Many offer the same level of protection and as many consumer products as banks.
1. There Is No FDIC Insurance
Federal Deposit Insurance was established in 1933 to protect depositors after a series of bank failures. It is an independent agency that monitors financial institutions for their soundness. However, it doesn’t have the power to oversee credit unions. Aside from being regulated by the federal government, credit unions are subject to various state and federal agencies.
2. Potential Members Need To Meet Eligibility Requirements
Each credit union has a field of membership that determines who can join. The goal of these organizations is to have a common bond among their members. Although membership is limited, it’s still possible to join a credit union. Each credit union typically requires that new members live, work, or study within a certain area. Even if you live outside of the region where the credit union is based, you can still join if you have a relative who already has a membership.
3. Membership Doesn’t End
Membership in a credit union can last for life. This means that even if you change jobs or relocate, you can still maintain your membership. If you love your credit union, you don’t have to worry about life changes canceling it.
4. Share Accounts Are Required And ATMs Are Free
Even if you’re only interested in getting a loan, credit unions require that you maintain a minimum balance in a share account. This type of account is similar to a savings account, except it pays dividends instead. The minimum balance required for a share account is usually around $1 to $50.
Many credit unions are part of national ATM networks, which means they have access to thousands of machines all across the country. This makes free ATM access widely available to their members.
5. Many Credit Unions Share Branches And Offer The Same Features
Small credit unions can provide their members with multiple branch locations. Through a shared network, credit union members can conduct various banking transactions at the offices of other credit unions. This allows them to reach thousands of locations across the country.
Before you open an account with a credit union, make sure that you’re getting the best possible service. Although some credit unions provide the same level of products and services as banks, smaller ones may not have the same features and may not be able to provide mobile banking or mortgages.
6. Credit Unions Use Different Wording
The biggest difference between credit unions and banks is that the former is owned by its members, while the latter is owned by its customers. The terms of deposit accounts at credit unions are different from those used by banks. For instance, a credit union’s share account is different from a bank’s certificate of deposit. However, these accounts still function the same.
It should also be noted that each member of the branch holds a vote. Their vote can be used to help determine who can gain a seat on the credit union’s board of directors. A vote is given to each member regardless of how much money they have in their accounts.
7. Most Credit Union Deposits Are NCUA Insured
The Federal Deposit Insurance Corporation (FDIC) provides a level of insurance that’s designed to protect the money that you deposit with banks and other financial institutions. Although credit unions aren’t as protected by the agency, their deposits are insured by the NCUA.
Final Thoughts
Many people pass up banking with a credit union because they have heard many misconceptions about them. In reality, becoming a member of a credit union offers its members many perks and benefits.
