How to Choose a Credit Union: 10 Factors to Consider

When deciding how to choose a credit union, determine the products or services that mean the most to you. Credits unions are known for their lower rates and fees, superior customer service and better loan approval odds.

This blog will explore the top 10 factors to consider on how to choose a credit union, along with the many other reasons to join a federally-insured credit union.

how to choose a credit union

How to Choose a Credit Union: Top Ten Factors to Consider

1. Rates and Fees

Credit unions (CUs) offer lower rates and fees on most of their products. Some examples include:

Lower loan interest rates – credit unions offer lower interest rates on many types of loans. This includes car loans, unsecured personal loans, home equity loans, small business loans, and mortgages.

The National Credit Union Association (NCUA), an independent government agency tasked with overseeing federal credit unions, provided a breakdown of various loans and mortgage rates – with figures supplied by the S&P Global Market Intelligence as of June 28, 2019.

As an example, the study found that CUs offered 15-year fixed-rate mortgages at 3.63%. In contrast, banks provided a rate of 3.84%. Credit unions also provided lower rates on adjustable mortgages and home equity loans.

When approving loans, CUs take deposits from other members to help you qualify. In addition, they use the earned interest to provide lower fees to other members.

Lower minimums and fees – credit unions provide various types of checking and savings accounts. Many have lower fees and minimums when compared to traditional banks. You may find some products do not assess any fees.

Lower credit card rates – the same study also compared the national average for credit cards. For a standard card, CUs offered an annual percentage rate (APR) of 11.80% compared to 13.61% for banks.

2. Outstanding Customer Service

Credit unions put member needs above profits. They know that members become an owner when they join. By taking the time to get to know their members on an individual level, CUs gain the ability to offer products specific to a member.

Several studies showed that CU customers felt more comfortable discussing their needs with a credit union staff member when compared to a bank employee. Furthermore, CUs help all of their members save money, regardless of income, or how much money they deposited into an account.

3. Community Focus of Credit Unions

Credit unions by design serve the needs of everyone that make up a local community. In fact, sometimes the only criterion to join a CU is to live in a particular area. The focus on superior customer service complements the community-first approach.

The smaller nature of CUs also provides an advantage because they are only accountable to their members. Credit unions make it a priority to find the most affordable products for their customers.

4. Apps and Technology

Credit unions offer many features that banks do. They both offer free online bill pay, mobile alerts, and deposits.

While national banks have more money to invest in the mobile experience, CUs are catching up in this area. Additionally, you must look at technological capabilities within their proper framework.

Improving the mobile experience makes sense for CUs because it provides another way to focus on end-user needs.

Additionally, focusing on improving networking conditions and the overall speed of browsers and devices complements the goal of meeting the needs of all members. For the remainder of the year – and throughout 2020 – expect credits unions to deliver better web-based and app experiences.

5. ATMs and Branch Locations

Many credit unions participate in a CO-OP network, also referred to as a shared branch. This network remains the second-largest branch network throughout the United States.

The network is comprised of locations that allow members to perform the same transactions at other branches, or use their ATMs without incurring any fees – just like they would at their regular CU.

Currently, more than 5,600 locations exist throughout the United States. You should have little difficulty finding a branch near your home, when you travel, or if you move. CO-OP shared branches also offer:

  • Service after business hours – many locations offer express terminals to serve members 24/7. You may use express terminals during regular business hours too. In addition to access, they provide an alternative to regular teller service
  • ATM access – You do not have to worry about finding an ATM. The network provides around 30,000 no-fee ATMs. The network does not limit ATM placement to shared branches. You will find ATMs at places like 7-Eleven, Costco, Publix, and Dunkin'.

6. Security and Insurance

While the FDIC insures bank deposits of up to $250,000, this government agency has no jurisdiction over credit unions. This fact should not discourage people from joining a credit union.

Most CUs provide the same type of protection and security, but from the NCUA. The NCUA also administers the National Credit Union Share Insurance Fund (NCUSIF), which insures deposits at federal CUs for up to $250,000 – the same amount as banks.

When researching how to choose a credit union, use the tool provided by the NCUA to check for federally-insured ones.

If you decide to visit a credit union before making a decision on which one to join, you have an easy way to tell if you walked into a federal CU. All federally-insured CUs must display prominent signage throughout the location.

Additionally, by law, CUs cannot terminate federal insurance without notifying its members first.

Credit unions could be regulated by the state in which they reside. These types typically use private insurance to cover member deposits.

While some may have government protection, not all do. You should always use the NUCA locator to check.

7. Assess Your Needs

Before making a final decision, rank which products are most important to you. In the case of loans, credit unions usually offer lower interest rates, fees, and terms.

Furthermore, CUs will work with those who have fair to poor credit. In contrast, national banks prefer to work with people within a prime category – those who have a credit score of 750 or more.

Car loans make up about one-third of CU business. Credit union car loans are usually at least 1% to 2% lower than other lenders.

As of November 2017, the Credit Union National Association (CUNA), an advocacy group, reported that new car loans increased by 14.3%. The CUNA finding also showed that loans for used cars during that period increased by 11.2%.

Also, take into consideration that banks place more of an emphasis on large business loans as they have to report back to outside shareholders. Credit unions fill a gap for small business owners.

They place member needs above profits, so you stand a better chance of getting approval.

While fewer people applied for business loans as of 2017, applicants achieved higher approval rates. A Federal Reserve survey reported that in 2017, 40% of people applied for business loans.
This figure is down 45% from the previous year. Because of decreased competition, more people received the entire requested loan amount.

A misconception exists that CUs do not offer small business loans. This could account for why only 9% of people sought a CU business loan. However, in 2018, credit unions reported over $71 billion in commercial loans.

Additionally, the U.S. Small Business Administration (SBA) reported that as of October 2017, around 200 credits unions participated in one of the SBA guaranty programs – guaranteed loans designed to help small businesses.

More good news is on the way for small business owners. On April 30, 2019, the NCUA partnered with the SBA. They created a three-year program designed to bring together small businesses and CUs.

8. Check Eligibility

The law requires that CUs define their "field of membership." This simply means it outlines the group of people they wish to serve.

Many credit unions do not have strict requirements. Because CUs serve the city or town you live in, when they open, they already serve the local community.

The NCUA defines these as community credit unions – by simply living in a specific area, you have already met the requirement.

You may view all NCUA credit union categories here. Some sample criteria below include:

  • Area of work or industry – some CUs require that you work in a specific industry. Many employers set up credit unions to serve their staff members – these are known as corporate credit unions.
  • Religious affiliation – some CUs require that you have a certain religious affiliation. This could include being a member of a church, synagogue or other places of worship.
  • Membership in other organizations – another common criterion relates to an individual or group-based memberships. For example, you may need to belong to a labor union or a fraternal organization.
  • Connections with family members – in many cases, if a family member belongs to a CU, you can too. Once a CU welcomes a family member, it will support your decision to join as well.
  • Education credit unions – many CUs have locations in college towns. This type of location helps people that need to open a checking account for the first time. Education CUs also serve as a great example of how to support a local community. CUs that encourage student membership likely cater to professors and others employed by the area's local colleges and universities.
  • Public credit unions – you may join a public CU by making a small donation to a specified charity. Alternatively, a public CU may require that you join a specific association that has a direct connection to it.

9Other Membership Benefits

After analyzing your needs, you should review all the additional benefits. You will likely require other products or decide to make a CU your primary financial institution.

Some credit union perks include free mobile banking, alerts and overdraft protection – similar to what banks offer. However, banks cannot compete with the individualized customer service CUs provide. Other credit union benefits include:

  • No-fee ATMs – credit unions do not charge fees for using out-of-network ATMs. Because many take part in the CO-OP network, you will find access when you travel.
  • Cashback – just like with a traditional bank, CUs offer credit cards that provide cash back on your purchases.
  • Unlimited bill pay – credit unions have ramped up the user experience when it comes to mobile banking. By joining, you gain access to free unlimited bill pay.
  • Overage – when credit unions make more money than needed to operate, they give back to their members. They typically distribute the excess money, known as the overage, as dividends to all their account holders.
  • Less emphasis on credit score – people with a poor credit score of 580 or less will have a harder time meeting loan criteria from banks. Because CUs strive to meet the needs of all their members, those with less-desirable scores stand a better chance of obtaining a credit union loan.

10. Check the Initial Deposit Amount

When opening an account, most credit unions ask that you make a small deposit of up to $25, and you pay a one-time membership fee. The deposit amount is much lower than most banks, and many accounts do not require that you keep a minimum balance.

Even a small deposit helps other members. All profits find their way back to members in some form including dividends and lower rates and fees.

We hope this information has helped you learn how to choose a credit union. Always remember that credit unions take profits and reinvest them into their products and services. The growing partnership with the SBA shows their commitment to helping small business owners too.

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