How Credit Unions Differ from Banks

Credit unions are not-for-profit financial cooperatives but the differences don't stop there.

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How Credit Unions are Different from BanksI am a fan of any financial institution that has a mission aside from profit. Credit unions fit the mission-focused criteria.

There are over 100 million credit union members in the United States that belong to the over 5,000 credit unions scattered across the country. Altogether, there are 50,000 credit unions around the globe. It’s an old but consistent movement that celebrates its global existence during International Credit Union Day.

So how is a credit union different from a bank?

To summarize, credit unions are not-for-profit organizations that are created and exist to serve their members. Similar to banks, credit unions offer many of the same banking products and services. They take deposits and offer ways for you to withdraw and use your money. Credit unions also offer loans and credit to meet your financing needs. With credit unions, you’re a member-owner, not a customer, providing you a financial cooperative to safely save and borrow.

Credit unions are financial cooperatives.

Financial cooperatives involve mutual assistance in working toward a common goal. A credit union is owned and jointly run by its members in a mutual exchange of providing and using financial services.

Credit unions are not-for-profit.

It doesn’t mean they don’t make a profit. However, the profits made are reinvested back into the membership. By reinvesting the profits, credit unions can grow it’s product and service offerings to meet the needs of its member base.

Credit unions thrive when members actively participate in the cooperative.

Members support the cooperative by having a full relationship that includes banking services, loans, and other financial products and services. Income made from these services help the cooperative cover its expenses and remain financially stable and viable.

The more business you have with a credit union the healthier the cooperative becomes.

Federal credit unions are supervised through the National Credit Union Administration. The NCUA is a federal agency authorized and back by the US Government. The agency also administers the NCUSIF that provides deposit insurance to member credit unions.

How to Join a Credit Union

You can join a credit union a number of ways and almost everyone is eligible to join. There are four main ways of joining a credit union. You can be eligible based on family, employer, geography or association.

With thousands of credit unions in the United States, you can find one to join with a simple search online using aSmarterChoice’s Credit Union Locator or the NCUA’s MyCreditUnion.gov website.

Want to learn more about credit unions? Here are 10 things you should know about credit unions.

Should you become a member of a financial cooperative?

I’m a believer that everyone should be a member of a credit union. In fact, even if you have one of the online or mobile-only banks I’ve written about, you’ll still need a local bank or credit union. I’ve found this to be an important factor in successfully managing finances.

As a user and tester of trendy banking apps, I’ve learned they still rely on “traditional” financial institutions. A credit union is rooted in tradition.

Jason Vitug

Jason is the founder of phroogal, creator of the award winning project Road to Financial Wellness, and author of the bestseller and New York Times reviewed book, You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life.

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