Credit Union Facts (10 Things You Probably Didn’t Know)
Don’t limit your search for a new home for your checking and savings accounts to banks. Credit unions may have more to offer than you realize.
We enjoy being a part of a credit union, and we know that as members, you do as well. Aside from low loan rates and member savings, we thought we’d share a few other facts you may not be aware of.
Credit unions are a form of financial institution that has been around for more than a century, but many people are still unfamiliar with them. Credit unions are cooperatives that are owned by their members and provide financial services to them. Credit unions, unlike commercial banks, are non-profit organizations dedicated to helping their members rather than profiting stockholders.
As a result, credit unions frequently charge cheaper fees and provide higher interest rates than other banking organizations. In this post, we’ll look at some of the most important facts regarding credit unions and what makes them such a unique and appealing alternative for many people.
10 Credit Union Facts
Other little-known facts regarding credit unions:
- The FDIC does not guarantee credit unions.
- The NCUA insures the majority of deposits.
- To join a credit union, you must be eligible.
- A member is a member forever.
- Credit unions may employ distinct jargon.
- Each member has one vote.
- A share account is required.
- There are usually free ATMs available.
- Credit unions may have branches in the same city.
- Not all credit unions provide the same services.
The FDIC does not guarantee credit unions
In response to a string of bank failures, they established the Federal Deposit Insurance Corporation in 1933. The FDIC, as an independent federal government body, audits banks for financial stability and compliance with consumer protection laws. The FDIC does not supervise credit unions, on the other hand.
Other government agencies have jurisdiction over credit unions. The National Credit Union Association, which is a federal agency governs us. NCUA standards apply to federally chartered credit unions, state regulatory boards monitor whereas state-chartered institutions.
The NCUA insures the majority of deposits
The FDIC’s insurance coverage of up to $250,000 per depositor is the most important benefit to consumers. This insurance gives assurance that money will not be lost if a bank fails. While credit unions are not insured by the FDIC, their deposits are.
The NCUA insures all federal credit unions and several state-chartered credit unions. Private deposit insurance may be available to some state-chartered credit unions instead.
To join a credit union, you must be eligible
All credit union charters include a field of membership that defines who is eligible to join. The premise is that there is a common bond among credit union members.
While membership is limited, it is probably easier than you think to join a credit union. Even if you live outside of a credit union’s geographic area, you may be allowed to join if you have a family member who is already a member or if you meet other conditions.
Chartway Federal Credit Union, for example, will provide membership to anyone who makes a $10 payment to the We Promise Foundation.
A member is a member forever
You can remain a member of a credit union regardless of what happens to your original credentials. “The best part is you’re a member for life,” explains Kearns. That means you can keep your credit union membership even if you move to a new city or change jobs.
Credit unions may employ distinct jargon
A credit union’s deposit account language differs from that of a bank. From a product standpoint, credit unions have share accounts and share certificates versus savings accounts and certificates of deposit. Despite their varied names, these accounts function in the same way. The biggest difference in terminology would be members instead of customers. Unlike bank customers, credit union members own the institution.
Each member has one vote
Members have the right to vote on who sits on the board of directors because they own the credit union. Each credit union member gets one vote regardless of how much money they have in their account.
A share account is required
Even if you only want a loan, all credit unions require you to keep a share account with a minimum amount. A share account is similar to a savings account at a bank, but it pays dividends rather than interest. It denotes that a person owns a portion of the account. The minimum amount might range from $1 to $50, with the lower end being the more prevalent.
There are usually free ATMs available
Many credit unions are members of national ATM networks. This grants you free access to thousands of ATMs across the country. As a result, free ATM access for credit union members may become as common as that provided by large banks.
Credit unions may have branches in the same city
The shared branch network, which enables members to carry out various financial transactions at an office of another credit union within the network, allows even the smallest credit unions to provide their members with access to multiple branch locations. This suggests that members of credit unions may have access to thousands of branches around the country.
Not all credit unions provide the same services
Verify the items and features a credit union offers before opening an account. Smaller credit unions could have fewer services available, but large federal credit unions like Navy Federal Credit Union and Affinity Federal Credit Union offer services comparable to those of most banks.
Some companies might not provide mobile banking apps or mortgages, for instance. Even more expansive credit unions could have limitations on the services they can offer corporate clients.
How Do Credit Unions Make Money?
Credit unions must continue to make money in order to pay their staff, open additional branches, and run their business. However, they give their members any remaining profit after expenses in the form of lower fees, dividends/interest, and member benefits.
The primary methods credit unions use to make money are as follows:
Although credit unions frequently charge less in fees than traditional banks do, they still do. For instance, if you overdraw your account, a credit union might impose an overdraft fee, or they might impose origination costs when you apply for a loan.
Credit union members may obtain an auto loan, a personal loan, a mortgage, or a business loan. The credit union will levy interest to the member. For instance, if someone borrows $1,000, they can end up paying back $1,100, netting the credit union a $100 profit.
Partnering services and advice
For a fee, some credit unions might provide professional advice and direction. For instance, they might employ a financial counselor in-house or suggest that members contact a different insurance specialist.
Credit unions, in contrast to regular banks, are exempt from the majority of federal and state taxes because they are member-owned. Credit unions benefit from this by paying less in taxes, increasing earnings, and improving benefits for members.
Every time a customer uses a debit or credit card at a business, interchange fees are automatically charged to the business. For instance, when you use your debit card to make a grocery purchase, the store must pay a modest processing charge to your bank (or credit union) in order for the transaction to be completed.
How much does it cost to open a credit union bank?
A checking or savings account can end up being the best option for you. If so, it’s simple to open an account at a bank or credit union.
Opening an account at a bank or credit union
First, you might want to ask a dependable friend or family member for a bank or credit union recommendation. Learn more about:
- The costs they impose
- The services they provide, such as mobile apps or online bill payment
- They offer savings account interest.
A savings or checking account typically requires a deposit of between $25 and $100 to be opened. In order for the bank or credit union to verify your name, date of birth, address, and identification number, you must also submit this information.
Social Security numbers, Individual Taxpayer identity Numbers (ITINs), passport numbers and countries of issuance, alien identity card numbers, and other government-issued identification numbers can all be used as identification.
- Many banks demand that you present a photo ID card issued by the federal or state government of the United States, such as a driver’s license, passport, or military identity.
- Some banks and credit unions accept foreign passports and consular IDs, such as the Matricula Consular card, if you don’t have a form of identification issued by the federal or state governments of the United States.
Matricula consular or CID card
A Matricula Consular is a recognized form of identity issued by the Mexican government. Similar IDs are available in other nations; they are referred to as consular identification (CID) cards. The United States has consulates that provide them.
Visit your country’s consulate for more information on how to obtain an ID card if you are a foreign national and don’t have a U.S. or state government-issued ID. You should also confirm with the banks and credit unions to see if they recognize foreign IDs.
ITIN and interest-bearing accounts
Some accounts give you interest based on the balance you have. Interest is considered money, even if it is only a small sum. For that reason, you must have a Social Security number or ITIN in order to open an interest-bearing account.
Contact the IRS at 1-800-829-1040 for further details about ITINs and how to apply for one, or check out the details here.
How To Get a Loan From a Credit Union
Although you typically need to join a credit union first, getting a loan from a credit union is similar to getting one from a bank or online lender. Loans from credit unions frequently have lower annual percentage rates (APR) and costs than loans from other types of lenders, which can make them more affordable.
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Determine your loan needs
To borrow money, you must first decide whether you genuinely need it, how much you can afford to borrow, and how you want to use it. Usages of personal loans are frequently:
- consolidation of debt
- consolidation of credit cards
- Home enhancements
- wedding expenses
- Vacation and travel costs
- Healthcare costs and procedures
Begin your investigation into credit union personal loans. You can often prequalify for a loan with a soft credit check (which will not damage your credit). Prequalification allows you to see the loan specifics that the institution will provide you, allowing you to evaluate various lenders more effectively.
Compare the following factors once you’re pre-qualified by a few lenders;
- Annual percentage rate (APR): The annual percentage rate (APR) is the annual interest rate plus any fees charged by your lender.
- Borrowing limits: Confirm if the credit union offers a loan that is large or small enough to meet your demands. Don’t borrow more than you need.
- Repayment terms: A typical personal loan has repayment terms ranging from 12 to 60 months. Shorter terms result in lower total borrowing costs but higher monthly payments.
- Credit requirements: For personal loans, many lenders will have a minimum credit requirement. Qualifying may be tough if you fall below the criterion.
- Membership: Review each credit union’s membership requirements to ensure you’re eligible to join.
Fill out an application to join a credit union
Credit unions are non-profit organizations that often require membership in order to be eligible for a personal loan. Membership requirements vary by banking institution and might range from military affiliation to residence. If a family member already has a credit union membership, you may be able to join as well.
In some situations, you may be required to open a checking or savings account with the credit union and make a small deposit as part of the membership process.
Check your information
You’ll need to verify your personal information once you’ve completed an application and are ready to proceed with a lender. Bring identification and proof of address, as well as your Social Security number and work and income information.
You’ll also be asked how much you want to borrow and must agree to a hard credit check, which allows credit unions to view your credit history. It should be noted that a hard credit check momentarily lowers your credit score.
Complete your Loan
If you receive final clearance, you must sign a contract to officially accept your loan from the credit union. After the transaction is completed, the credit union will deposit your funds immediately into your bank account.
Credit unions are able to give a variety of advantages and benefits to their members by pooling member deposits to offer loans and other financial services. In addition, compared to other financial organizations, credit unions frequently charge lesser fees and offer better interest rates.
A variety of financial goods and services, including checking accounts, mortgages, and credit cards, are available from credit unions to suit your needs. Knowing the facts about credit unions will enable you to decide whether they are the best option for you.