Credit unions are not-for-profit organizations owned by their members. Their primary goal is to help the community by helping their members save and borrow.
When first formed, credit unions were usually associated with specific companies, offering employees low-cost loans and other basic financial services. Today, many credit unions have expanded their field of membership to include anyone who lives or works within the community—but their original purpose has remained the same.
Myths About Credit Unions
Here are a few common myths you may have heard about credit unions:
- I can’t join one. Yes, you can. Eligibility may be based on where you live, a particular business or profession, college alumni, etc., but chances are there are probably quite a few you’re eligible to join.
- Branches are inconvenient. Your specific CU will probably have fewer branches than any of the big banks. However, through the Shared Branching network, you can conduct all your banking at other member CUs all across the world, so really, your credit union has thousands of branches.
- My savings aren’t guaranteed by the FDIC. True, but CUs offer the exact same protection through the National Credit Union Association (NCUA), another government agency.
- Credit unions are technologically inferior. This might have been true several years ago, but today, most CUs offer all the same bells and whistles, including mobile banking, mobile deposit, and mobile payments.
- There’s a membership fee. At most credit unions, all you need is at least $5 in your account, but if you close the account, you get it all back.
Are Credit Unions Better Than Banks?
Credit unions are similar to banks in that they both offer the same products and services consumers need most, but they are very different in terms of their priorities and the way they’re managed. Each has its pros and cons. Here are a few of the main differences:
- They are member-owned instead of governed by a board whose main objective is to make money.
- Credit union profits are returned to members in the form of lower fees and interest rates, while big bank profits go to stockholders in the form of dividends.
- CUs offer over 30,000 surcharge-free ATMs, more than any single bank.
- CUs are smaller, more personal, and locally grown.