Should You Join a Credit Union?

With banks’ fee policies changing, some consumers are turning to credit unions

January 3, 2012 RSS Feed Print

Over the past six months, many banking customers have faced new debit card fees, and then the cancellation of those fees. (Other fees, for using out-of-network ATMs or bouncing checks, still exist.) The confusion led to many unhappy customers, some of whom are asking whether credit unions would be a better choice for them. According to the Credit Union National Association, more than one million customers decided to move their money to credit unions in 2011, joining the 90 million existing customers.

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Credit unions, which, unlike banks, are owned and governed by their members, are often misunderstood as exclusive places with limited services. But in reality, most Americans are eligible to join them and they provide an increasingly diverse array of services, including free ATM use, electronic banking, loans, and interest-bearing savings accounts.

Here are answers to five common questions about credit unions:

Am I eligible to join a credit union?

While membership in a credit union depends on belonging to a particular community, such as a workplace, region, or church, most consumers are eligible, even though many don't realize it. They might just need to investigate options within their communities.

So how do you find one? Websites such mycreditunion.gov can help. Also, ask around—your employer, spouse's employer, or local government council can direct you as well.

Do credit unions offer better interest rates?

On average, credit unions offer lower rates on loans and higher rates on savings accounts—just what consumers want. The National Credit Union Administration (NCUA) reports that five-year loans for new cars at banks have an average interest rate of 5.1 percent, compared with 3.73 percent for credit unions. Many credit unions also have limits on interest rates. Federally charted credit unions, for example, have an 18 percent limit that applies to all loans, including those for cars and credit cards.

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Are deposits insured the same way they are at banks?

Yes. Credit unions are insured by the federal National Credit Union Administration, which provides the same protections that the FDIC applies to banks—insurance coverage on deposits up to $250,000. NCUA's website allows credit union members to check on their insurance coverage; the agency also recommends checking for a prominently displayed sign at the credit union that says it is NCUA-insured.

Do credit unions ever collapse?

Like banks, credit unions can fold, but that usually means they merge with another credit union. Regardless of what happens, members are protected through the NCUA insurance. NCUA says if a federally insured credit union fails, members typically receive payments for their deposits within three days.

What about financial literacy—can a credit union teach me how to make smart money decisions?

Credit unions pride themselves on being a top source for financial information. Many offer seminars and information on topics such as preventing identity theft and managing credit cards. More information on any of these topics can be found at the NCUA website or by contacting your local credit union.

Twitter: @alphaconsumer

Tags:: credit unions,; credit,; money

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Ya I would like someone to help me with a real credit card instead of a per paid one I get all the time.i would not be using it all the time just to help me at on a bill that due tomorrow and to get food and a few presents for my boys and rapping paper. I have nothing and I feel bad that they have friends over and there's no tree no presents out nothing I just need a break and for someone to trust me with a real one for once

Coley Fawn Parazoo of OR 11:53AM December 23, 2012

Great article! If you are interested in joining a credit union, www.CULookup.com offers you the opportunity to find credit unions that you are eligible to join near you.

Chelsea of VA 12:50PM April 18, 2012

During the banking crisis of 2008, the banks involved were very large multi-national coorperation's. Such as Citibank, Chase bank, Bank of America, and others. These banks and lending institution's, i.e. Countrywide, Lehman Bros., all had to take bailout money from the first bailout of 750 billion dollars. Meanwhile Credit Union's as a whole were not touched by the collapse of the market and economy. You might ask how that is possible? Well one thing is that Credit Union's are mostly local to your city or state. This keeps them in the category of small business and how I like to think of them as Mom and Pop bank's. Since their small and local they easily avoid the pitfall's of massive loan's, giant debt, and being involved heavily in the market. (Wall St.) That's not to say you cannot invest in your local Credit Union. As the article mentioned they have some of the best, most informed people to help you with all financial information, including investing in the market place. So what's the downside? Well the biggest downfall is also their biggest asset, and that is that their local. So if you bank at a Credit Union you may only have 2-3 other location's around the city, unlike the larger banks who tend to have multiple banks within close proximity, or they offer an ATM stand or ATM's in stores for your convience. Also if you travel out of state you won't have full acess to your bank, with the exception of online banking. And Online banking at a Credit Union is very up to par with their larger counterpart's. Also with any checking account you should be provided with a visa or mastercard that you can use wherever life make take you. So in closing I find there are tremendous advantage's with banking through Credit Union's, and it is my firm belief the financial bailout of the banking industry in 2008 was completley unncessary. We could have and should have let those companie's go into bankrupcy and let the free market work itself out. They were in no way too big to fail, but they convinced our Government they were. Instead of them failing and letting other's take over their spot's, and let the American people relize there are always other options avalible to them. Such as Credit Union's, working with personal small investment companie's, that won't take huge risks with your money. Who care about keeping your investment safe. And so on. We are still able to take these action's now, so that in 15 or 20 years when we've forgotten about what happened, and forget about the money we lost, never to be seen again. And feel safe and secure again. But out of the blue the same people in some cases or the same institution's will come up with a new way to make enormous profits at the cost of losing their Businesse's, and they will call out to the Government again who will deside they are too big to fail. The only question remains, will you lose your pention, your savings, your retirment, your home. Or will you advert disaster as the Credit Union's did in 2008.

Brian of CO 5:05PM March 26, 2012