Considering Credit Unions?  4 Factors to Consider

Considering Credit Unions? 4 Factors to Consider

Credit unions are increasingly pushing into new products and trying to attract more and more members, extending their fields of membership rules to make it easier to become a member.   In many cases, they offer higher savings and CD rates, and better home equity loan and mortgage rates. Consumers are increasingly responsive - many are attracted to the idea of doing business with an organization that is owned by the members and designated by an affinity group (member of a certain group or lives in a certain location). 

As you look at opening your first credit union account, there are several important factors that may be important to understand. 

1. NCUA versus FDIC.

All banks are required to be FDIC insured.  Most but not all credit unions are federally insured in a similar manner through the National Credit Union Administration (NCUA).  Those credit unions with federal in their name and many others are federally insured by the NCUA. There are a few state-chartered credit unions in certain states that are covered only by private deposit insurance.  If you are concerned whether a credit union is NCUA-insured, perform a search on BestCashCow.  The first line on a credit union’s BestCashCow page will indicate whether it is NCUA insured.  You’ll also find other important information on that page concerning eligibility (fields of membership in their charter), locations, products offered and financial position.

2. You Become a Stakeholder.

Credit unions require you to maintain a share account (savings account) with a minimum balance even if you are seeking a loan.  The amount of money that you hold in this savings account, or share account, with the credit union may determine your ownership interest and right to participate in the governing of the credit union.  Other terminology is also different.   A certificate of deposit is often called a share certificate that may also grant ownership and governing interest.  Interest you earn is sometimes called dividends.

3. Member for Life. 

If you become a member of a credit union, you have the right to stay a member for life, regardless of what happens to your original qualifications (moving, changing jobs, retiring, etc.).

4. Branch Network and ATM Access.

Branch access and free ATM access may be larger than the credit union’s footprint.  You should ask if the credit union belongs to a nationwide shared branch and ATM networks.   If so, you may be able to conduct banking transactions and withdraw money in a less limited manner than if it were not a member.

Credit unions can give consumers more choices, but they may not always be the right choice for you.  Fees may be higher, rates can be lower, accessibility can be limited, and a credit union may not always have the banking product that you're looking for. If there is a match, they can be worth considering.

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