There is a wide variation of size and total assets among credit union systems around the world, from small volunteer-run operations with a few members to institutions with thousands of members and assets worth billions of dollars.
The services provided by credit unions to their members are similar to those provided by retail banks, including deposit accounts, credit, and other financial services.
The following article will educate you on the top credit unions and how to access their services at your convenience. To begin with, let’s take a look at what a credit union is all about.
Table of contents
- What Is a Credit Union?
- How Is a Credit Union Different From a Bank?
- Are Credit Union Deposits Safe?
- What Should You Look for in a Credit Union?
- What’s the Process for Joining a Credit Union and Opening an Account?
- Is it Easier to Get a Loan From a Credit Union?
- 10 Best Credit Unions in 2023
- Conclusion
- References
- Recommendations
What Is a Credit Union?
Savings and loan cooperatives belonging to nonprofit organizations are known as credit unions. Credit unions, including checking and savings accounts, auto loans, mortgages, home equity loans, and credit cards offer many financial products and services.
According to the National Credit Union Administration, an agency that charters regulate, and insures the deposits of credit unions, MyCreditUnion.gov, a website operated by the agency, credit unions are member-owned and cooperative institutions with low-interest rates.
Usually, credit union members have some form of affiliation with their employer or another group or region. Organizations such as religious groups, schools, labour unions, and homeowner associations are examples of group affiliations. People whose family members qualify for credit union membership can also join that credit union.
Small, community-based credit unions were the beginnings of credit unions. According to Credit Union Times, the largest credit union in the U.S. has 7.9 million members, and three others have over 1 million members. But such large credit unions are an exception. In most cases, members are much smaller.
According to American Banker, credit unions hold deposits totalling $1.1 trillion and have over 110 million members.
Rather than earn profits for shareholders the way banks do, credit unions exist to serve their members. Since a credit union doesn’t have a profit motive, any “profits” it earns can be returned to its members in various ways.
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How Is a Credit Union Different From a Bank?
Consumers and businesses can access deposit accounts and loans through credit unions and banks. However, they differ in more than one way.
Here are some of the differences:
- Owned by customers and owned by banks. Credit union members own them. Banks tend to offer lower interest rates for deposits. (But not always.)
- The interest rates charged by banks tend to be higher. Occasionally, this is not the case.
- Fees are generally higher at banks. However, this is not always the case.
- Banks may offer more products and services.
- The reward programs offered by banks are generally better.
- More branches are usually found at national or regional banks. It is possible, however, for a credit union to expand its reach through networks of branches and ATMs that connect members of one credit union to services offered by other credit unions.
- Mobile banking apps and online services tend to be more robust at banks. Banks are catching up to credit unions.
- The Federal Deposit Insurance Corporation insures deposits at banks. Deposits at credit unions are sometimes insured by the National Credit Union Administration or by state government agencies.
- Customer satisfaction is a hallmark of credit unions.
What Are the Merits and Demerits of Credit Unions?
While there are thousands of credit unions ranging in size from small to large, there are some generalizations that can be made.
Merits
- A credit union is a tax-exempt, not-for-profit organization governed by a board of directors elected by its members.
- Savings and checking accounts at credit unions usually have higher interest rates.
- Credit unions usually offer auto loans, home mortgages, and other consumer loans at low-interest rates.
- Banks may charge higher fees than credit unions.
- Savings and lending services are available from most credit unions.
- A credit union’s reputation is generally one of personal service, friendliness, and high customer satisfaction.
- The lending guidelines of credit unions may be easier and more flexible.
Demerits
- Membership criteria are common to all credit unions. It may be easy to meet these requirements, but they may not be open to everyone.
- Credit unions may charge an annual fee. Although it may be a small amount, such as $5, it is not zero.
- The products and services offered by a small credit union may be limited. For instance, a credit union may not offer credit cards or business loans.
- Cashback, mileage points, or travel rewards may not be available on credit cards offered by credit unions.
- There may not be enough ATMs or branch locations for credit unions.
- In comparison to banks, credit unions may offer less robust online banking and mobile apps.
Are Credit Union Deposits Safe?
Yes, in a nutshell. However, it gets trickier from there.
Credit unions come in two types:
- federally chartered credit unions regulated by the NCUA
- state-chartered credit unions regulated by state-level government agencies
In the United States, there are a roughly equal number of federal and state-chartered credit unions. Although there may be subtle differences between federally chartered and state-chartered credit unions, deposit insurance is the most important difference for members.
The National Credit Union Share Insurance Fund insures deposits at federally chartered credit unions.
Federal or state government agencies may insure deposits at state-chartered credit unions. The American Share Insurance Fund, owned by credit unions, insures a small percentage of state-chartered credit union shares.
In a report by the Government Accountability Office, credit unions without federal deposit insurance must clearly and conspicuously notify their members that their deposits are not insured.
If the credit union fails, deposit insurance protects depositors by covering losses up to $250,000 per depositor.
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What Should You Look for in a Credit Union?
Choosing a credit union is largely a matter of personal preference; however, there are some important factors to consider:
- Financial services.
- Savings rates: The top credit union interest rates will be much closer to 1% than most banks offer.
- Lending rates: If you need a personal loan or a home loan, a credit union may be able to beat what you can find elsewhere.
- Deposit insurance: Ideally, you want the government to cover your money.
- Credit card rewards program: You can earn rewards with a full-service credit union.
- Branch and ATM locations: In all 50 states, Co-op credit unions have shared branches and almost 30,000 surcharge-free ATMs, according to their website.
- Membership fee: Some credit unions don’t charge joining fees if you are affiliated with your employer, your location or your group. However, if you do not qualify for membership on those terms, you can join by paying a modest fee.
- Monthly checking account fee, if any: Credit unions are known for offering free checking accounts.
- ATM fees: Some credit unions reimburse ATM fees you incur when using an ATM outside their network.
What’s the Process for Joining a Credit Union and Opening an Account?
Membership and eligibility requirements exist to join and open an account at a credit union. This is a misconception. Membership is easy.
- Discover which credit unions are right for you: There are multiple credit unions available to most people, so it’s smart to shop around and compare offerings before choosing one that suits your preferences and needs.
- Join our membership program: For application purposes, you must supply your address, a valid government-issued identification, Social Security or tax identification number, and why you are eligible. The credit union will likely approve you based on your credit and banking history. You may have to pay a one-time fee to join a credit union.
- Open an account and make an initial deposit: Online accounts are available at some credit unions.
Is it Easier to Get a Loan From a Credit Union?
With excellent or good credit, you may find that obtaining a loan from a bank or credit union has an attractive rate and reasonable terms. The answer is more complicated if your credit is poor or fair.
It is possible that credit unions have more flexible approval guidelines and will consider factors other than your credit score and history when approving your loan.
The ability to make decisions locally can boost your chances of qualifying.
You may also qualify for a larger loan amount with the same qualification guidelines by choosing a credit union because of its lower interest rates.
Car loans are especially competitive among credit unions, often offering significantly lower interest rates. In this case, a credit union could be a good choice for a car loan.
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10 Best Credit Unions in 2023
There are a lot of credit unions, but only a few of them have outstanding offers. Hence, the best credit unions include
1. Alliant Credit Union
The interest rates offered by Alliance are above average. Interested members can become members by donating $5 to a nonprofit organization. There are 80,000 ATMs in the Alliance network, and its mobile app is highly rated.
2. Consumers Credit Union
Consumers offer a low-interest rate on their savings account, but high interest on their checking account, although you have to meet certain activity requirements. The consumer reimburses member fees for out-of-network ATMs. Membership is open to everyone who has deposited at least $5 into a savings account and paid a $5 fee.
The Navy Federal Financial Group has about 300 branches and has a strong customer service reputation. Checking accounts are free. Marines, active service members, veterans, Department of Defense employees and retirees can join Navy Federal.
4. Connexus Credit Union
Checking accounts from Connexus is free. ATM fees on ATMs out of network will be refunded to members. The network has 54,000 fee-free ATMs. Joining the Connexus Association, an education organization does not require a membership fee. A $5 donation will join you as a member.
5. First Tech Federal Credit Union
It offers a competitive interest rate on its fee-free checking account. One of its most attractive savings accounts is for kids. We do not have a restriction on membership; you can join after joining a nonprofit organization that teaches financial literacy at $8.
6. Golden 1:
Golden 1 Credit Union offers free checking accounts to teens and college students in addition to standard free and premium checking accounts. A co-owner must be at least 18 years of age for New Generation Checking. College students receive full access to Student Checking.
Young account holders can transact without their parents present with a Youth Savings account. As with the regular savings account, this account provides 0.05% APY.
Golden 1 is available to anyone who lives or works in California. There are more than 70 branches in California, as well as shared ATMs (about 30,000 nationwide) and shared branches available to members.
7. America First Credit Union
Although based in Ogden, Utah, members of this credit union can access about 30,000 fee-free ATMs nationwide through the CO-OP ATM network. Upon maintaining a balance of at least $500, the account earns a small amount of interest without a monthly fee.
A small number of people in Arizona, Idaho, Nevada, New Mexico, Oregon, and Utah are eligible for membership, including those who live, work, worship, volunteer or attend school in those areas.
8. Boeing Employees Credit Union
BECU has over 50 branches, most of which are in Washington State. However, the credit union is a member of the CO-OP network that provides its members access to 5,000 branch locations and 30,000 surcharge-free ATMs across the nation.
Members are offered a 0.50% APY on balances of $500 or less in the BECU’s Member Advantage checking account, while savings accounts offer a 0.02% APY on balances of $500 or less. Boeing employees, residents of Idaho and Oregon, and some counties in Washington state are among the select groups eligible to join this club.
9. SchoolsFirst Credit Union
There are no monthly fees associated with these checking and savings accounts, and there are over 28,000 fee-free ATMs in this credit union. Students can also create JV and Varsity Club accounts on SchoolsFirst. Applicants must be part of the California public education community or work in other education positions.
10. State Employees’ Credit Union
Savings accounts and checking accounts at State Employees’ Credit Union earn interest, but saving certificates earn a higher rate. An APY of 0.55% is offered by a five-year certificate, which is above the national average. Members of the credit union are primarily state employees and their families; it has a wide branch network in North Carolina.
Conclusion
The NCUA insures credit unions like banks, backed by the FDIC. In the US, an agency called the National Credit Union Administration regulates and supervises credit unions.
There might also be local winners in your community and some of the best institutions overall.
References
- Advantiscu – Why Are Credit Unions, Safer Than Banks? Are they Insured?
- Bankrate – Pros and Cons of Credit Unions
Recommendations
