Credit Unions

Credit unions are created, owned, and operated by their participants. As such, they are not-for-profit enterprises that enjoy tax-exempt status.

How Does a Credit Union Work?

Members pool their money in order to be able to provide loans, checking and savings accounts, and other financial products and services to each other. Any income generated is used to fund projects and services that will benefit the community and the interests of its members. To become a member of a credit union, all you need to do is open an account. You are then considered a shareholder and can vote in determining the board of directors and any other decisions surrounding the union. 

Advantages of Credit Unions

• Credit unions are exempt from paying corporate income tax on earnings. 
• Credit unions are only required to generate revenue equal to daily operations. As a result, shareholders enjoy higher interest on money deposited and lower interest from loans, along with lower fees on checking accounts and ATM withdrawals. 

Disadvantages of Credit Unions

• Credit unions typically have fewer physical locations. 
• Smaller credit unions have a smaller budget for technology, and thus, their website and security features are typically less advanced. 
• Credit unions have less choice in products. For example, banks have more credit card options, account options, and loan options. 
• Credit unions typically have shorter hours than banks. 

How to Combat These Disadvantages

Many credit unions are part of an ATM network designed to extend their reach. This means that if you're part of a credit union that is local to one city, but it is part of this network, you would be able to access your funds in ATMs across the country, not just in your city. 

Insurance on Credit Union Accounts

Just like banks, credit union accounts can be insured. Federally chartered credit unions and most state-chartered credit unions are insured up to $250,000 per account. To verify if a credit union is federally chartered, you can check the Credit Union Locator.