Credit Unions
A credit union looks a lot like a bank on the surface, checking accounts, savings accounts, and loans. The big difference is who owns it and who it is designed to serve.
The simple version:
A credit union is owned by its members. If you have an account, you are one of the owners.
What Makes Credit Unions Different
Credit unions do not have outside shareholders. Profits are returned to members through better rates and lower fees.
The goal is to serve members, not to maximize profit for investors.
Many credit unions offer lower loan rates and higher savings rates compared to large banks.
Credit Unions vs Banks
- Owned by members
- Not for profit
- Often lower fees
- Membership requirements may apply
- Owned by shareholders
- For profit
- Wider branch and ATM networks
- Usually open to anyone
Key Terms
Member
A person who owns an account at a credit union. Members are also owners.
Membership requirement
A rule that defines who can join, such as living in an area, working for a certain employer, or being related to a member.
NCUA insurance
Federal insurance that protects deposits at credit unions, similar to FDIC insurance for banks.
When a Credit Union Makes Sense
You want lower fees and more personal service
You plan to keep a checking or savings account long term
You are looking for competitive auto or personal loan rates
You meet the membership requirements
Key Takeaway
Credit unions and banks offer many of the same products, but they are built for different reasons. Credit unions focus on serving members rather than maximizing profit, which can mean better rates and fewer fees if you qualify to join.