Did you know that only 30% of Americans say that they have confidence in traditional banks? This number has remained low for the past few decades and it’s not surprising when you look back at some of America’s notorious bank scandals.
In 2008, JP Morgan famously fell under hot water for their faulty mortgage-backed investments. In 2016, Wells Fargo was caught creating millions of fake accounts in order to meet their sales goals. Stories like these confirm why many people have suspicions. The problem is, banks are ultimately businesses looking to make a profit for shareholders, which doesn’t always involve protecting their customers’ best interests.
However, you don’t have to use a bank for your financial services. There is a very attractive alternative to big banks: credit unions. Want to know if you qualify? Read ahead to learn more about how to open a credit union account.
What Is a Credit Union?
What is a federal credit union and how are they different from banks? Credit unions are membership-based, not-for-profit financial institutions. They offer many of the same services that banks do, including:
- Checking and savings accounts
- Retirement accounts
- Loans such as auto and mortgages
- Credit cards and debit cards
The main difference between credit unions and banks are their business models. Credit unions are not-for-profit, they do not have shareholders.
Instead, a credit union’s primary aim is to serve their members.
As a result, all credit union earnings are funneled back to the credit union and used to benefit members in the form of lower fees and competitive interest rates. Some credit unions differ, so make sure you know what to look for in a credit union before making your decision.
How Does Credit Union Membership Work?
The other notable feature of credit unions is that they require membership. While banks have customers, credit unions have members. People acquire membership through a common bond or community such as employment, family, or certain geographic location. You probably won’t be eligible for every credit union in your area. However, odds are that you’ll be eligible for at least one.
Once you’re a member, you will own a share of the credit union, and have voting rights on who can become a board member.
Most credit unions operate on a local level with multiple branch locations and very few advertise their existence. As a result, you may not be aware of the ones in your area. However, if you take the time to find them, you’ll enjoy a plethora of benefits upon becoming a member.
What Are The Benefits of a Credit Union?
Due to their not-for-profit business model, credit unions are able to provide attractive benefits that banks simply can’t compete with. Many of these benefits save their members money. The Credit Union National Association (CUNA), estimates that credit unions provide an average of $117 of annual benefits to individual members and $246 to member households.
Here are some of the specific benefits of joining a credit union:
- Superior “customer” service – Credit unions are famous for their wonderful customer service. They truly want to take care of their members. As a result, credit union staff will go the extra mile to help members achieve their financial goals. They’ll develop financial plans for you and even offer educational financial training for their members.
- Lower fees – Since credit unions aren’t profit-focused for outside shareholders, they can reinvest earnings into the credit union itself. As a result, they don’t have to charge as many fees as banks do. For example, Mission Fed has no monthly fees on a savings account. When credit unions do charge fees, they’re typically lower than those you’d find at a bank.
- Higher savings dividend rates – Another way credit unions redistribute their profits to their members is in the form of increased dividend rates for savings accounts, retirement accounts, and certificates. So, how much interest do savings accounts earn? Generally, credit unions boast an average of 2.06% dividend rates on five-year certificates, compared to bank’s averages of 1.59%. Over time, such differences can make a notable impact on the money in your savings.
- Lower loan interest rates – Whether you need an auto loan or a mortgage, credit unions generally provide lower rates on loans compared to most big banks. This is because they aren’t seeking profits for outside shareholders. In turn, credit union members can take out loans without drowning in interest.
- Voting rights – As a member, you are a part-owner of the credit union. As a result, you have a say in important decisions. For example, you have a vote on who becomes a board member. This is another testament to the member-focused approach of credit unions.
Credit unions’ goal of serving their members permeates every aspect of their business. In order to enjoy these benefits, you have to meet the credit union’s membership requirements. That’s why we’re here, to break down the requirements of joining a credit union.
What Are the Requirements to Join a Credit Union?
The requirements to join a credit union are based on the “field of membership.” To become a member, you have to share a common bond or community with the other members. There are a number of elements that can constitute a common bond, including:
- Having family connections to the credit union – Credit unions often extend membership within families. While some credit unions allow extended family members to join, others only admit immediate family. Ask your family members if they currently use a credit union and [apply-account:body~see if you are eligible to join].
- Enjoying eligibility due to your employer – Employment-based membership is one of the easiest ways to gain access to a credit union. Many employers may have a relationship with a specific credit union, giving their employees access to it. Speak with your boss to find out if this is an option for you.
- Living in the local area – Many credit unions are community-based. This means they extend membership to a certain geographic area. The easiest way to find out if your city or town has a community-based credit union is to do some online research. The National Credit Union Administration’s search tool is a great resource for finding credit unions near you.
- Belonging to a place of worship – Religious affiliation is another element that can grant you membership to some credit unions. Ask other members of your church, mosque, or synagogue if they belong to one.
- Being a member of an organization – Being a student or alumni of a particular school, belonging to a union, or being a member of a particular Homeowner’s Association can also grant you membership to certain credit unions. Don’t leave any stone unturned, as credit union membership may be available to you.
Locate a credit union near you and find out if you are eligible for membership.
How to Find a Credit Union Near You
So how do you find credit unions that you may be eligible for? Here are a few suggestions:
- Ask your family members.
- Talk to your employer and co-workers.
- Ask neighbors about community-based credit unions.
- Ask your school administrators.
- Do online research about credit unions in your local area.
- Check out your local Yellow Pages.
Purchasing Your Credit Union Share
Since every credit union member owns a part of the organization, you’ll be asked to purchase your share upon becoming an official member. The cost of a share is usually between $1 and $25.
How Do You Maintain Your Credit Union Membership?
While finding a credit union you’re eligible for takes a little research; once you’re a member, you maintain your membership for life. If your original eligibility qualifications shift, don’t worry. You can move, or leave your job without risking your membership.
The only thing that could cost you your membership is failing to maintain good standing with your financial accounts.
Consider Banking with a Credit Union
As you can see, credit unions have a lot to offer, especially when you compare them to traditional for-profit banks. These benefits arise out of their not-for-profit business structure, which serves members first and foremost. This fact alone allows people to trust credit unions and enjoy more peace of mind than they would at a traditional bank.
Choosing the right financial institution is important. It can have lasting impacts on your overall wealth. From loans to dividend rates, banks and credit unions differ in notable ways. Over time, these differences add up.
Mission Fed is a trusted San Diego based credit union. Having served the San Diego area for over 50 years, Mission Fed knows how to care for its members and support their financial success. Mission Fed is also known for its competitive dividend rates and low loan interest rates. Open an account with Mission Fed and become a member at one of the largest credit unions in San Diego!
The content provided is intended for informational purposes. Mission Federal Credit Union disclaims any liability for decisions you make based on the information provided. References to any specific commercial products, processes, or services, or the use of any trade, firm, or corporation name in this article does not constitute endorsement, control or warranty by Mission Federal Credit Union.
Gallup. Military, Small Business, Police Still Stir Most Confidence.
The Washington Post. Everything you need to know about JPMorgan’s $13 billion settlement.
USA Today. Wells Fargo agrees to $575 million settlement affecting all 50 states in wake of fake accounts.
Credit Union National Association. The Benefits of Credit Union Membership – Third Quarter 2019.