What is a Credit Union?

You've Probably Heard of Banks, But You Might Not Be as Familiar with Credit Unions

We are financial institutions too, but are not-for-profit organizations owned by all of our members versus for profit organizations owned by a handful or small group of individuals. Credit unions focus on helping our members save and borrow and receive affordable financial services.

Usually, credit unions offer higher savings rates, which is important to young people just starting their savings accounts. Credit unions typically charge lower fees compared to banks and are known for providing personal service and helping members plan for the future.

The credit union philosophy is members helping members. Many members of credit unions like knowing their savings will help other members get mortgages to buy homes and loans for new cars.

You can join a credit union based on where you and your family live, work, worship, or the associations you or your family belong to. Talk with your co-workers and family members to see which credit union they may be a member of and would possibly be a good fit for you.

How is a Credit Union Different than a Bank?

In the United States, credit unions are not-for-profit organizations that exist to serve their members rather than to maximize corporate profits. Like banks, credit unions accept deposits, make loans, and provide a wide array of other financial services. But as member-owned institutions, credit unions focus on providing a safe place to save and borrow at reasonable rates. Unlike banks, credit unions return surplus income to their members in the form of dividends.

Favorable Rates and Customer Service

Fees and loan rates at credit unions are generally lower, while deposit dividend and interest rates are generally higher than banks and other for-profit institutions. Credit unions are democratically operated by its members (those joining the credit union), allowing account holders an equal say in how the credit union is operated, regardless of how much they have on deposit at the credit union.

Membership Access

The credit union’s Board of Directors, who are elected by the members, decide who the credit union will serve. In order to join a credit union, potential members must be part of a field of membership, which is typically based on one’s employment, community, or membership in an association or organization. As credit unions serve members of modest means, many will actively expand their field of membership to serve other select groups and/or geographic areas when identified as needing access to affordable financial services. Credit unions designated as low-income, predominately focus on providing financial services at reasonable rates in areas that are often underserved or unserved by banks.

NCUA Share Insurance Coverage

Federally insured credit unions are insured by the National Share Insurance Fund (NCUSIF).  The NCUSIF is operated by the National Credit Union Administration (NCUA), a federal government agency, backed by the full faith and credit of the United States government. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 increased the maximum share insurance coverage at all federally insured credit unions to $250,000.00. Account balances in excess of $250,000.00 at a federally insured credit union can be fully insured if properly structured.  For additional information on NCUA’s share insurance coverage, see Share Insurance Coverage.

Is a Credit Union Right for Me?

People all over the world belong to credit unions, including over 98 million members in the United States. Because credit unions are not-for-profit financial institutions, their focus is serving the financial needs of their members and not making a profit. On the whole, credit unions typically offer higher rates on savings, fewer fees, and lower rates on loans. Here's what you can expect from a credit union:

Personal Service

Credit unions provide personal service designed to help members grow their savings, pay off debt, and plan for the future. Many credit unions also provide free financial literacy resources, training, and counseling to help their members better understand and handle their financial matters.

Voting Rights

Credit unions are democratically run financial institutions providing each credit union member one vote. Members vote on those from the membership who are running for the credit union’s board of directors, as well as any other credit union official positions open for election at the annual membership meeting.

Not-for-profit Focus

Credit unions are member-owned and operated, not-for-profit organizations. This enables them to fairly price products and services as well as offer competitive interest rates.

Community Spirit

As groups with a common geographic area, workplace or other association, members often have shared interests and appreciate participating in an institution designed to help other members.

Fewer Fees

Credit unions tend to offer fewer and sometimes reduced fees for their products and services compared to those of other financial service institutions due to their not-for-profit, cooperative structure. Credit unions generally also have no or lower minimum balance requirements.

Expanded Services

Credit unions have been able to keep pace with the needs of their members by offering a variety of products and services in addition to savings and consumer loans, including:

  • Direct deposit

  • Financial education/counseling 

  • Electronic banking

  • ATMs

  • ACH origination

  • Overdraft protection

  • Home equity loans

  • Mortgage loans

Most credit unions either offer free access to a large network of ATMs or provide reimbursement for fees incurred when using other institutions' machines.

Shared Income

Credit unions return surplus income to their members in the form of dividends.

Insured Deposits

Through the National Credit Union Share Insurance Fund (NCUSIF), which is backed by the full faith and credit of the United States government, the funds of all federal and most state-chartered credit union members are insured up to at least $250,000.00 per individual depositor, per federally insured credit union. Member’s account balances in excess of $250,000.00 at a federally insured credit union can be insured if properly structured.

Accessible to Most Americans

To join a credit union, you must be eligible for membership. Members of each credit union share a "common bond," such as being employed by the same employer, belonging to an organization or church, or living in the same community. Some credit unions serve multiple groups with different common bonds. Each credit union determines the specific group or field of membership it will serve, subject to the approval of its regulator.

Is My Money Safe in a Credit Union?

Credit unions encourage their members to save regularly to build economic security for themselves and their families. Federally insured credit unions offer a safe place for you to save your money, with deposits insured up to at least $250,000.00 per individual depositor. The National Credit Union Administration (NCUA) is the independent agency that administers the National Credit Union Share Insurance Fund (NCUSIF). Like the FDIC's Deposit Insurance Fund, the NCUSIF is a federal insurance fund backed by the full faith and credit of the United States government.

The NCUSIF insures member savings in federally insured credit unions, which account for about 98 percent of all credit unions in the United States. Deposits at all federal credit unions and the vast majority of state-chartered credit unions are covered by NCUSIF protection, and not one penny of insured savings has ever been lost by a member of a federally insured credit union.