![]() In other words, as a credit union member, you’re not just a depositor like at traditional banks-you have an ownership interest in the institution. If you bank with a credit union, you’re considered a member. Who Owns a Credit Union?Ĭredit unions are entirely member-owned. According to the National Credit Union Administration (NCUA), the national average rate for five-year certificates of deposit offered by credit unions was 2.66% as of March 2023, compared to 1.83% at traditional banks.Īnother key difference between the two is credit unions tend to be smaller in size, have fewer brick-and-mortar locations and offer a less diverse range of products compared to traditional banks. On the other hand, because credit unions are not-for-profit, profits tend to be redirected back to members in the form of higher interest rates on savings accounts and lower fees on loans and credit cards. To do so, they’ll typically minimize the interest they pay you on your deposits and maximize the interest they charge for lending you money. While credit unions and banks both offer banking services, the former’s main goal is to promote the well-being of members, whereas the latter may prioritize shareholders over customers.īecause traditional banks are for-profit, they aim to make a profit for shareholders. So, what’s the difference between a bank and a credit union? ![]() Credit unions typically hold annual elections, during which the general membership votes to determine who sits on the board of directors. These volunteers are responsible for overseeing the organization and deciding on the credit union’s direction. And in the unlikely event that the credit union fails before you make a withdrawal, your deposits are insured up to $250,000 by the National Credit Union Administration (NCUA).Īny income the credit union generates through interest, fees and loans is then used to fund community projects, reinvest into the organization or provide services that directly benefit members, like paying higher savings interest rates.Ĭredit unions are usually operated by a board of directors consisting of volunteers elected by the other members. When you decide to withdraw your funds, you’ll receive your initial deposit plus the interest accrued. ![]() During that time, your $5,000 will accrue interest, and your credit union will lend that money to other members who need loans. Think of it like a shared piggy bank that funds one member’s loan with another member’s savings.įor example, imagine you deposit $5,000 into a credit union savings account and leave it there for two years. When members deposit their money into credit union accounts, they create a communal pool of money used to provide loans to other members. In those cases, you can often join online by simply opening a savings account and making a small initial deposit-as low as $5 in some cases. However, many other credit unions have relatively lenient membership requirements. For example, Navy Federal Credit Union only allows active-duty members of the military, veterans, Department of Defense employees and their immediate family members to participate. To join a credit union, you’ll typically need to meet certain criteria, such as belonging to a specific group or organization, working for a partner company, living in a particular geographic region or having a relative who is already a credit union member. And because these nonprofit entities aim to serve members rather than maximize profits, members often enjoy reduced fees, affordable loans and higher savings rates. A credit union is owned, operated and controlled by the members who use its services. A credit union is a not-for-profit member-owned financial cooperative offering traditional banking services, including credit cards, loans and checking accounts.
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