How To Join a Credit Union
Written by
John Csiszar
Edited by
Emily Gadd
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Only about one in three Americans use a credit union. But credit unions can save you money with low fees and interest rates on loans. You can also earn more with better-paying savings accounts.
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What Is a Credit Union?
A credit union and a bank have a lot in common–as both offer many of the same services. But a credit union is not a bank. It’s a not-for-profit financial institution that is owned by its members. Just like a bank, you can:
- Open a checking and savings account
- Invest in CDs
- Get a loan from a credit union
But credit unions aren’t designed to make a profit. Instead excess revenue is returned to members in the form of:
- Lower rates on loans
- Higher rates in deposit accounts
- Less fees overall
This makes credit unions a cheaper option in most cases for your banking needs.
Credit unions do require membership, which may include:
- A supported place of work or government organization
- A family member of current credit union member
- Living in an area supported by the credit union
- Membership to a group or association (place of worship, union, etc.)
You’ll need to check your eligibility before joining.
How to Join a Credit Union
Step 1: Eligibility:
One potential drawback of joining a credit union is that you may not be eligible. Many credit unions have eligibility requirements based on things like:
- Your employer
- Geographical location
- Military experience
However, in many cases, those requirements can be gotten around. Sometimes through a family membership or even by donating a small fee. Many credit unions have also loosened their restrictions in recent years to draw in more customers.
When researching a potential credit union, review the membership requirements before you apply.
Step 2: Documentation:
Once you’ve picked a credit union, gather your documents. Most credit unions have requirements similar to traditional banks. For example, the requirement to be at least 18 years of age. You should also expect to provide the following information to join:
- A driver’s license, state ID, or other government-issued identification like a passport
- A utility bill, mortgage statement, or other documentation verifying your address
- Social Security number or Taxpayer ID number
Depending on the credit union, you might also have to prove your eligibility. For example, if you are joining a credit union that’s tied to your employer, you’ll have to prove that you have a qualifying relationship with that company.
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Step 3: Complete an Application:
Once you’ve got all your documents in order, you’ll have to fill out an application. This can usually be done either online or in-person.
The application will ask you to submit personal and financial information. This includes your Social Security Number or Tax ID. You’ll want to also create a secure username and password for online and mobile access to your account.
Step 4: Fund Your Account:
The last step in opening an account at a credit union is funding your account. You can either bring in a check to your credit union or provide electronic banking information. This will include your:
- Account number at your bank
- The institution’s routing number, or ABA number
If banking in-person or at an ATM, you can also deposit cash into your account. And most credit unions allow you to deposit checks through the mobile app as well.
Pros and Cons of Credit Unions
No financial institution is the right answer for everyone, as they all have pros and cons. Even individual credit unions are not the same as one another. But here’s a look at the general pros and cons that apply to credit unions.
Pros
- May offer higher APYs and charge lower interest rates
- May offer more personalized service
- Nonprofit institutions owned by members rather than shareholders
- Community-focused institutions that may offer local rebates and benefits
Cons
- May not have the international capability of global banks
- May not have an extensive branch network
- May have membership restrictions
- May not offer the widest variety of investment options, advanced estate planning or wealth management services
Something to note about credit unions is that while they still carry federal insurance, it is not the same type as traditional banks. Banks use the Federal Deposit Insurance Corporation, or FDIC. Credit unions carry NCUA insurance, for the National Credit Union Administration.
Both are backed by the full faith and credit of the U.S. government for up to $250,000 per depositor. From the perspective of customers, there isn’t much of a difference. Still, it’s something that account holders should be aware of.
How To Choose a Credit Union
Sometimes, it’s the credit union that chooses the customer. For example, if you’re considering joining Navy Federal Credit Union, you’re out of luck unless you’re a:
- Current or former member of the military
- Department of Defense civilian
- Family member of a qualifying military member
In other cases, you’ll want to choose a credit union using the same criteria you would to vet a bank. Every customer has different needs and priorities. But here are some of the factors you should consider when making your choice:
- Number and proximity of branch locations
- Fees
- Interest rates you pay on credit products like loans or credit cards
- Interest rates you earn on savings and/or checking deposits
- Range and depth of financial products offered
- Customer service accessibility and quality
- Fee-free ATM locations
- Mobile app
- Local discounts and benefits for members
- Customer reviews and testimonials
- Community involvement
Who Might Prefer Using a Credit Union
Credit unions can have great appeal to certain types of customers. Generally speaking, credit unions have more of a “small town” feel, as they are designed to help their community members. This means you might get more personalized service at a credit union. You may also get special rates on deposit accounts or lower interest rates on auto loans or mortgages.
Credit unions might also be a better choice for those looking for an in-person experience outside of a big bank. Credit unions can straddle the line between the features of a full-service banking institution and the better rates and lower fees of an online bank.
Credit Union vs. Bank: Which Is Better for You?
Both credit unions and banks let you open checking or savings accounts and get loans for a new car or home. Plus, both offer ATM access and in-person or online access to your account.
But credit unions are not publicly-traded companies and don’t turn a profit. For this reason, most of the services offered are at a better cost than a bank. Interest rates on mortgages and auto loans are typically lower than most banks. Plus, you can usually earn a higher rate on your savings or money market accounts at a credit union.
Credit unions may not offer the same amount of financial products or services as a traditional bank, though. Most larger banks offer:
- Investment services
- Financial planning
- International banking
And many larger banks have a larger physical footprint, with hundreds (or thousands) of branches for in-person banking. Plus banks don’t require membership–while credit unions do.
Choosing between a bank and a credit union comes down to your preferences and financial needs. If you prefer the lower costs and fees for credit unions and live near one that services your area, it may be a good fit. But if you need more financial services and want nationwide or global access to in-person banking, you might need to sign up for a traditional bank.
Jacob Wade contributed to the reporting of this article.
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