In this article, we’ll discuss how to join a credit union in four simple steps.
Before learning how to join a credit union, you should know that the largest difference between credit unions (CUs) and banks relates to their tax status.
Banks are classified as for-profit organizations, so their earnings go to outside shareholders. By law, those who serve on the board of directors for banks must base all decisions in favor of their stockholders and not their customers. Furthermore, anyone serving on a board of directors for a bank does not have to use that financial institution for their banking needs.
In contrast, members own credit unions. After joining a credit union (CU), you become a member of that collective, which operates as a not-for-profit organization.
Members elect those who serve on its credit union board of directors. This better balances the needs of all members as it does not matter how much money an individual has put into an account.
Credit unions take their earnings and reinvest them in the products they provide to their members. While anyone may join a bank, a credit union must have membership criteria. However, that criterion is sometimes as simple as where you live.
Credit unions are known for having better customer service because they serve local communities. They tailor their product options when it comes to checking and savings accounts, loans, and certificates of deposits (CDs).
People that need a loan or a better mortgage rate may turn to a credit union when they cannot meet the stringent criteria traditional banks have in place.
Now that you know how a credit union differs from a bank, and you have an understanding regarding membership, learn how to join a credit union in five easy-to-understand steps. Those steps include:
Before joining a credit union, check your eligibility because many CUs have criteria in place to become a member. Typically, requirements mean you and other members have commonalities – this could be where you live, your job industry or your school status.
Credit unions are common to find in college towns – being a student or affiliated with a college or university is a requirement that some CUs have in place. Students are entering a life phase where they need to open checking or savings accounts, obtain their first credit card and start working on their financial goals.
Additionally, many large companies have their own CUs. If you work for a company that sponsors a credit union, your human resources contact should have the ability to provide the details you need, including the necessary paperwork.
Many credit unions have eased their requirements. When a credit union opens, it already meets one of the criteria defined by the National Credit Union Administration (NCUA), the government agency that monitors federal credit unions.
Once a CU establishes itself in a certain city or town, by default it already serves the people that make up that community. If you already live in the same city or town, chances are you meet at least one criterion of some credit unions.
Another path to membership exists. Many CUs let you join if you donate a small amount to a specific charity. A CU that falls into the public category may also require that you join an association that has close ties to it.
To see all the NCUA-defined credit unions, you may check all the categories here.
After you confirm eligibility, make sure the credit union you want to join belongs to the NCUA. Members of the NCUA offer deposit protection through the National Credit Union Share Insurance Fund (NCUSIF).
This fund insures all deposits made at federal CUs just like the FDIC insures bank deposits – both agencies provide deposit protection of up to $250,000. The only difference is the FDIC has no regulatory authority over CUs.
You should know that some CUs are governed by the state in which they operate. This usually means a private company insures their deposits. These kinds of CUs may be members of the NCUA, but that is not always the case. That is why you should always check with the agency or use its up-to-date CU locator.
After confirming any eligibility requirements beyond living in a certain city or town, you fill out an application. You can do this in person, online or even at a car dealership.
If you go to a branch to fill out an application that serves as a chance for CU employees to get to know you and your product needs. You may also get help online – many CUs use a contact form to learn your name, and if you are a current member.
Expect to provide information on what type of account or product you want to open. When using a contact form, also let the CU know if you need help. Most CUs reply back within 24 business hours.
To join, most credit unions require that you make a small deposit into an account – the amount typically ranges from $5 to $25. Furthermore, a credit union will likely ask that you pay a one-time membership fee.
However, for a product like a basic checking account, once you make the small deposit, most CUs will not require that you maintain a particular balance.
Credit unions often offer similar products to banks including products for personal use as well as business use. Some CU benefits include:
Even if you move or retire from a certain profession, most CUs allow you to retain your membership. You may have to keep an account open or make some type of contribution to continue your membership.
At the same time, they have the ability to invest in people on an individual level because they take the profits earned from other members and offer them in the form of dividends and lower rates and fees. Your contributions always help others reach their financial goals.
However, maintaining balances are not practical for many. Others find it unreasonable that they cannot have 100% control over what they deposit or take out of their accounts.
If you opt for a CU checking account with limited perks, besides making the small deposit, you usually do not have to keep a minimum balance.
If you choose to open an account with additional benefits, you will most likely pay a monthly fee. However, those fees are usually lower than what other lenders offer.
Lower fees also apply to overdrafts. This area is where banks tend to earn a lot of their profits. When you join a credit union, it also provides overdraft protection.
Because you are already paying lower fees on a checking or savings account, a lower overdraft fee also helps you save more money. A NerdWallet study found that CU overdraft fees are around $10 less than traditional banks.
On average, credit unions charge $26 for each transaction while banks charge $35. When you pay an overdraft fee per transaction, those fees accumulate, which keeps the overdraft cycle going. If you do not want this type of protection, make sure you opt-out.
The U.S. Small Business Administration (SBA) has honed in on this because fewer people are seeking business loans.
In April 2019, the SBA and the NCUA formed a partnership to assist people in obtaining credit union loans. For the next three years, small business owners have the opportunity to participate in an SBA loan program.
Car loans account for one-third of all CU business, so buying a vehicle from a car dealership may lead you to a credit union. You may wonder why, but a simple explanation exists. If you have a below-average credit score or worse, dealers may recommend a CU. This makes sense for both the dealer and the credit union – both make a profit.
Another way is even easier. If you decide to purchase a car, SVU or truck from a dealership, that dealer may have the ability to make you a member before even visiting one.
Now that you know the top five steps needed on how to join a credit union, analyze your product needs. Make sure you know the requirements and understand the benefits that are most important to you. This will help you get the most out of your membership.
In general, when you join a credit union, you should expect more personalized service, lower or no account fees, better interest rates and a greater willingness to work with people that have bad credit scores.
Credit unions continue to show their dedication to small business owners with their continued support of the SBA. On the technical side, credit unions have taken steps to improve the mobile experience.