A credit union is a strictly members-only financial institution. Owned and operated by members, it often has a volunteer board. Its focus is on serving the membership, not on enriching shareholders. As a result, unions work to provide members with more favorable debt and saving instruments than commercial institutions can offer. These unions pass on profits as dividends. Sounds great, right?
As of 2007, credit unions have more than 88 million members in the United States, which is about 43% of the economically active population, according to a World Council of Credit Unions report. Credit unions can provide a range of financial services including banking, savings and loans, insurance, credit cards, and advisory services. These are nice perks, if you qualify…
Keep in Mind
By law, credit union membership is only extended to members of the group(s) the union already serves. For example, membership can be limited certain professions, worker’s unions, houses of worship, educational and alumni institutions, geographic communities, and even individual employers. Members’ immediate (and sometimes extended) family are often allowed to join the union.
Lack Of A.T.M. Machines
Credit unions often don’t have a large number of branches and A.T.M.s. As a result, you should make sure that your union will reimburse out-of-network A.T.M. fees. Thankfully, many do.
Lack Of FDIC Insurance
One important thing to note is that with a credit union, your money isn’t insured by the FDIC. Instead, it is insured by the National Credit Union Association (NCUA), which manages the National Credit Union Share Insurance Fund (NCUSIF). NCUSIF coverage has levels similar to FDIC insurance: $100,000 per individual, and $250,000 for retirement accounts. A small minority of unions are not insured; if the bank goes bust, your deposit will disappear.
An Option We Love
To find a credit union, ask around. You may be eligible through your parents, partner, employer, or community. The Credit Union National Association has a comprehensive online database to help you locate a union and determine your eligibility.