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(Last Updated On: February 6, 2018)

Credit Unions: How They Work & How to Join (It's Easier Than You Think)All the hype you’ve heard about credit unions is well-earned.

It’s the reason we’ve seen growth at more than three times the rate of credit activity among consumers of other lender types. And it’s the reason you need to know how credit unions work and how to join one, which is easier than you might think. Whether it’s better customer service you’re looking for, or better chances of getting a loan when you’re trying to repair your credit, get the facts about how a credit union could be just what you need.

How credit unions work

What’s the difference between a credit union and a bank?

The main difference lies in the bottom line. Banks have to answer to investors. Credit unions are owned by its members (i.e., customers). It is this distinction that enables credit unions to be more community-focused, making decisions that put people over profits.

Specifically, credit unions differ from banks in:

  • What happens to the profits. Banks give them to investors; credit unions pass profits on to members in the form of better fees and interest rates.
  • How they are insured. Both are insured, but differently – FDIC vs. NCUSIF or private insurance.
  • How you open an account. Any bank will take you (provided your ChexSystems report checks out). Credit unions require membership based on you meeting certain qualifications relative to your affiliations in the community.
  • Where you go for in-person transactions. You can use any of a bank’s numerous locations. A credit union have may just one location, but you can stop into any one of many credit unions that are part of its network.
  • Fees and interest rates. You’ll typically pay less and earn more through a credit union.
  • Qualifying for a loan with bad credit. It’s a challenge either way, but going through a credit union increases your chances, as the decision-making process involves real people and isn’t limited to computers.

For details, see answers to related questions below.

Are credit unions FDIC insured?

No, credit unions are not FDIC insured like banks. However, federally-insured credit unions have the same amount of insurance through the National Credit Union Share Insurance Fund (NCUSIF) – up to $250,000 per account holder.

There are two ways that you can know whether a credit union is federally-insured:

  • It has “federal” in its name
  • It is located in Arkansas, Delaware, South Dakota, Wyoming, or the District of Columbia where all credit unions are all federal

If the credit union does not meet either of those two criteria, it is probably state-chartered and should have some level of state-mandated private insurance.

Are credit unions non-profit?

Yes, credit unions are non-profit, but that does not mean they are charitable organizations. They simply don’t have investors to whom they need to show a profit. Instead, credit unions are owned by the members themselves. Any profits made benefit its members via better interest rates and fees.

Of course, it’s also possible for a credit union to pass profits on to members in the form of bonuses. That’s what Erie Federal Credit Union did, paying $550,000 out to its members, with individual bonuses ranging from a few dollars to $900.

How do you find a credit union?

You can search online via:

You should also check to see if there is a credit union associated with your employer or any organization you are affiliated with. You could also try your local chamber of commerce, Better Business Bureau, and, of course, family and friends who may be able to point you in the right direction.

Can anyone join a credit union?

Each credit union has its own eligibility requirements that determine who can join. It’s called their field of membership or FOM. This makes people think twice about credit unions, assuming they won’t meet the criteria, but there are some pretty wide-ranging qualifications, so you might be surprised.

You could be eligible based on your:

  • Employer
  • Location
  • School
  • Religion
  • Professional affiliation
  • Community
  • Civic/social groups

You could even qualify based on the associations of your family members, so it’s worth doing your homework. Some credit unions even allow you to join simply for making a donation to a specific charitable organization.

Also, keep in mind that once you are a member of a credit union, you can stay a member for life. That means there’s no need to worry about your eligibility changing – when you leave a particular employer or school – and you having to find a new credit union to join; once you’re in, you’re in.

Which credit unions allow you to join just for making a charitable donation?

The list is surprisingly long. As reported by Time, you can join:

  • Alliant Credit Union for making a $10 donation to Foster Care to Success
  • DCFU Financial for making a $60 donation to the Henry Ford Museum
  • Digital Federal Credit Union for paying a $10 membership fee to join one of eight participating organizations
  • ESL Federal Credit Union for paying a $55 membership fee to join the George Eastman Museum
  • First Tech Federal Credit Union for making an $8 donation to the Financial Fitness Association or a $15 donation to the Computer History Museum
  • Golden 1 Credit Union for making an $8 donation to the Financial Fitness Association
  • Kinecta Federal Credit Union for paying a $10 membership fee to join the Consumers Cooperative Society of Santa Monica
  • Lake Michigan Federal Credit Union for making a $5 donation to the ALS Association
  • Michigan State University Federal Credit Union for making a $35 donation to the Michigan United Conservation Clubs
  • Pentagon Federal Credit Union for making a $14 donation to Voices for America’s Troops or a $15 donation to the National Military Family Association
  • Redstone Federal Credit Union for making a donation to one of 15 participating organizations
  • San Diego County Credit Union for making an $8 donation to the Financial Fitness Association
  • United Nations Federal Credit Union for paying a $10 membership fee to join Kilimanjaro Initiative USA or $25 to join the United Nations Association of the United States of America
  • Wings Financial Credit Union for making a $5 donation to the Wings Financial Foundation

Learn more about each of these options.

What credit unions are part of shared branching?

Unlike the big banks, credit unions don’t have branches all over the world. That would make visiting a credit union downright impossible when you are traveling or if you move out of the area. Enter shared branching – the networking of multiple credit unions that allows you to make transactions in any one of the networked branches or ATMs.

Most credit unions are part of a shared branching network, also called CU Service Centers. Search for them via Co-opCreditUnions.org.

How do you open a credit union account?

It’s a similar process you would go through in opening an account through a bank:

  • Choose a credit union. Again, there are eligibility requirements, but you can sort through your options pretty efficiently through the websites listed above.
  • You’ll be asked for the same type of personal information and identification you’re asked for when you open a bank account.
  • Make a deposit into a share account (i.e., savings account). This is required of all members, with minimums ranging from $1 to $50

Credit union services

What services do credit unions offer?

You should expect the same kind of services from a credit union that you would from a bank – checking, savings, loans, cashier’s checks, certified checks, money orders, wire transfers, safe deposit boxes, notary services, and certificates of deposit (which credit unions call sharecertificates). Credit unions are even getting more sophisticated with online services and apps comparable to banks.

Can credit unions have business accounts?

Yes, credit unions do offer business accounts.

Credit union loans

What type of CPN loans do credit unions offer?

It depends on the credit union, but types of CPN loans offered may include:

Just be sure to shop around. Though credit unions typically offer good terms, it’s still worth double-checking. Look at other credit unions and banks, and compare rates on sites like Bankrate and Nerdwallet.

What are credit union interest rates?

Interest rates will vary from one credit union to the next, but in general, you should expect them to be a little better than interest rates offered by banks.

Will credit unions work with bad credit?

It depends on various factors but, in general, yes – despite bad credit, credit unions may extend a loan to you that a traditional bank will not.

As we reported in How Credit Unions Help Rebuild Bad Credit:

“Unlike banks, credit unions are non-profit organizations owned and operated by their members who democratically elect a Board of Directors. For this reason, the decisions made regarding the credit union take into consideration your best interest, unlike banks that are always looking out for their own best interest (i.e., the bottom line).

“For this reason, credit unions are more forgiving of bad debt — including bankruptcy — making it easier for you to get a credit card or auto loan than it would be through a traditional bank.”

Just keep in mind, there is no guarantee. Whether you qualify for a loan will depend on the credit union, your relationship with them, just how bad your credit is, employment, income, and down payment (if applicable).

Still not convinced?

Millennials are. Find out why they’re driving credit union growth.