How to join a credit union
What Exactly is a Credit Union?
A credit union provides most of the services that a commercial bank provides; services such as checking accounts, saving accounts and loans. The key difference between a credit union and a commercial bank is that a credit union is a not-for-profit organization that is owned by its members. A credit union is governed by a volunteer Board of Directors elected by the credit union’s members. This distinction instigates an impact that ripples throughout the entire organization.
Credit union customers are members. Members own shares of the credit union and own share accounts (savings accounts), share draft accounts (checking accounts) and share term certificates (certificates of deposit).
Unlike banks, credit unions are required to enforce a membership criteria. Credit union members may belong to a certain geographic area, work for a particular employer or belong to another association such as a church or civic group.
Credit unions are run by member representatives for the benefit of the members. Therefore credit unions often offer more attractive products such as lower interest loans and credit cards or fewer fees. While credit unions rarely offer the ATM availability of their commercial peers, most offer reimbursement for fees incurred at the ATMs of other institutions.
Federal Vs State Credit Unions
There are two types of credit unions; firstly are those regulated by the National Credit Union Administration (NCUA) [ww.ncua.gov] and insured by the National Credit Union Share Insurance Fund (NCUSIF), which are federal credit unions. The NCUSIF provides deposit insurance of up to $250,000 for credit union accounts, similar to the way the Federal Deposit Insurance Corporation [www.fdic.gov] provides deposit insurance to bank accounts.
Secondly are state-chartered credit unions. Such credit unions are regulated by state law, which may vary state by state, and may be insured by private insurers.
Why Join a Credit Union
Credit unions can present a very attractive option compared to commercial banks. Because credit unions have no shareholders for whom they are trying to return a profit, they often charge fewer and lower fees for checking accounts, savings accounts and other transactions such as cashier’s checks and international money transfers. Some members cite the personalized service as their reason for choosing to use a credit union. Credit unions consistently outscore banks on customer satisfaction levels. Credit unions have seen an influx of applicants in the past few years as many Americans grew frustrated with the poor fiscal behavior of some banks during the financial crisis. In 2011, November 5th was deemed Bank Transfer Day; thousands transferred from banks to credit unions in protest of high bank fees.
A concern consumers might have is a credit union’s ability to keep up with the latest technology. Many credit unions have invested heavily in technology to satisfy the needs of their membership base and provide online banking, mobile banking apps and high-standard security features. However, credit unions rarely have the funds to develop new technologies themselves and thus are unlikely to be on the cutting edge of banking technology.
How to evaluate and join a credit union
Joining a credit union is simple. Those who meet the membership criteria simple purchase a share of the credit union for an average cost of $5 to $10.
Step 1 Find a credit union convenient to you
Check if your employer offers a credit union. What about other organizations to which you belong such as a homeowners’ association or labor union, or church, school or alumni groups? Many credit unions allow members’ family members to join, so it is a good idea to see if a family member already belongs to a credit union. Finally, you can search geographically for federal credit unions at the NCUA site here. Look for federal credit unions which have insurance backed by the full faith and credit of the United States government. Such credit unions must display the official NCUA insurance sign in their offices and you can confirm insurance status by searching for the credit union here. In addition, no credit union may terminate its federal insurance without prior notification to its members.
Step 2 Check if you are eligible for membership
Once you have compiled a short list of credit unions based on geographical nearness and other ties, use the NCUA Research a Credit Union tool to further investigate the organizations. You will likely have to go to the website of each credit union to determine if you are eligible to join.
Step 3 Do your research
Now that you have a short list of federal credit unions you are eligible to join, you will want to research three areas; 1) governance 2) costs and 3) services.
Governance - Research how the credit union is governed. Many credit unions publish their annual reports on their websites, along with the organization’s history and recent news. This is a good starting point. Look out for trends such as shrinking membership or federal investigations, as these are signs of a troubled organization.
Services - Reflect on what services you use from your current bank. List the services provided by the credit unions under consideration. Take into account not only online checking, ATM fee policy, mobile apps, electronic transfer and bill pay hours of operations
Costs - While listing the services, make sure to note their associated costs. Also check what fees the credit union charges. Are their fees for checking accounts? Savings accounts? Overdraft fees? Compare these fees to those charged by your current bank.
Switching to the right credit union could save you significant money. Take some time to see if a credit union is right for you