Credit Union Explained, How Does It Work and Membership 

A credit union is a type of financial institution that is owned and governed by its members. The credit union provides different kinds of financial services like checking and saving accounts and loans. They are non-profit organizations that work to provide quality services to their members rather than maximize profits. They are entirely dedicated to the community. It can be small, which means it is run by fewer people, or big, where a lot of people participate all over the country. Even big companies or organizations create credit unions for their employees and members.

Key Points

• Credit unions are like community banks that are owned and run by the people who use their services. 

• The main aim is not to make a profit but rather to focus on helping its members.

• Credit union members receive benefits such as lower fees, reasonable loans, and better savings rates.

• There are specific criteria to join a credit union.

• Many credit unions have lenient membership requirements, like joining online by simply opening a savings account and making a small deposit.

How to Join a Credit Union? 

Membership in a credit union is not easily available to everyone because to join a credit union, you must meet certain eligibility criteria.

Here are a few steps you must know before joining a credit union.

1. Membership Requirement

• As we know, credit unions have different categories, and so do their requirements. For example, State Employees Credit Union, which is the second largest credit union in the US, prefers employees from North Carolina and their families.

• Pentagon Federal Credit Union allows anyone and everyone to become a member and is the third-largest credit union in the country.

• Eligibility criteria are also determined by location, occupation, and certain organizations.

2. Credit Union Near Your Location

To filter out the requirements of credit unions, you can use a credit union locator to search for the nearest one. But before choosing the credit union near you, it's better to determine your financial needs. You better go for those that offer better interest on CDs and provide high-interest rates on savings accounts. 

3. Open your account with the Credit Union

After selecting a credit union that fulfills your requirements, you must open an account that meets specific requirements.

Documents

Just like traditional banks, you will need to prove your identity to credit unions. You will need to provide your passport, government ID, or driver's license. You must also provide your social security number or tax identification number.

Membership fee

To open an account with a credit union, you will need to pay a membership fee. The amount varies from union to union. Navy Federal Credit Union requires you to pay $5 as a membership fee.

Deposit Money

As soon as you open your account, you will need to deposit some money via cash or through cheque. You can also open an online credit union account that offers online banking services.

How to Choose the Best Credit Union? 

Before considering a Credit Union, it is important to determine some factors.

1. Look for membership requirements.

Compared to banks, credit unions are only available for some, as there are certain criteria one must meet before opening an account with a credit union. Check for eligibility requirements, as some credit unions have broader requirements while others are lenient.

2. Look for the production services they offer.

The primary objective of credit unions is to provide products like checking and savings accounts, while there are some exceptional ones that offer additional services like loans, credit cards, mortgages, and investment options. Select a credit union that fulfills your needs and offers a few more competitive rates than others.

3. Look for Fees and Account Requirements.

Unlike banks, credit unions have lower fees as their main goal is not to generate profit but to provide services to their members. Still, it is very important to consider costs like maintenance, ATM, overdraft, and money transfer fees.

4. Look for Customer Service.

Credit unions place more emphasis on personalized service and building relationships. Look for those that provide customer service. If you want to go digital, prefer those credit unions that offer online services and have digital banking options.

Pros and Cons of Joining Credit Union 

Pros of joining a credit union

When you join a credit union, you are offered several advantages.

1. Lower fees and lower interest rates on loans: Credit unions are not-for-profit organizations, and they are not aligned with income tax on any profit they earn. This makes them offer lower fees and lower interest rates on loans. The members of credit unions get better rates on car mortgages, etc., than banks. 

2. Higher rates on savings and checking accounts: Credit unions are known for providing higher rates on savings and checking accounts. Members interestingly deposit their money to grow faster in them. Despite inflation and market volatility, members of credit unions contribute to and protect each other's investments.

3. Deposits are insured: If your credit union is affiliated with the National Credit Union Administration, then NCUA will insure your deposits. Up to $250,000 per person per account is safe.

Cons of joining a Credit Union

When you join a credit union, you also face several disadvantages.

1. They have limited branches and access: This is the biggest con of credit unions, as they are small-scale organizations and have limited physical branches. If you need face-to-face customer service, you might need help getting. Also, they have limited ATMs at limited locations.

2. Limited products and services: Credit unions indeed offer a high-interest rate on savings and credit accounts, but they also have limited products and services that are added to their cons. They have limited investment options, few loan products, and limited financial services.

3. Less advanced technology: Compared to banks, credit unions are less technologically advanced. They might offer services online, but they are limited. Credit unions may not offer electronic account transfer services or mobile checking.

Do You Need a Good Credit Score to Open a Credit Union Account? 

Credit  Union doesn't need to check your credit score to open a checking or savings account. However, they do check your banking history. They do so to determine what line of credit you are allotted from credit bureaus. Your banking history tells what type of bank account you can open or able to access.

How Long Does a Credit Union Take to Approve? 

Once your credit application is approved, It takes 7-10 working days. 

What's the best credit union to join?

The best credit unions are:

• Alliant Credit Union
• PenFed Credit Union
• Consumers Credit Union
• First Tech Federal Credit Union
• Connexus Credit Union

Final Words

Credit unions are not-for-profit organizations that work in the interest of their members. They have lower borrowing rates and provide higher deposit yields, which make them more affordable than traditional banks. However, it is also true that they don't offer mass services that are available from banks. To be a credit union member, you need to meet the eligibility criteria, which are different for every union. Credit unions are the best place to make an investment as they are safer and ensured by the NCUA.

Read Also:

1. What is Direct Deposit

2. Emergency Saving Accounts

3. How to Void a Check