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Credit union

A not-for-profit financial cooperative owned by its members, offering accounts and loans to people within the field of membership its charter sets.

What It Means

A credit union is a not-for-profit financial cooperative owned by the people who use it, its members. Like a bank, it takes deposits, makes loans and offers other financial services, but it issues no stock and returns its profits to members. By law it can serve only people within the field of membership set in its charterCharter schoolA tuition-free public school run under a charter, a contract with a state, district or other authorizer, that families choose rather than being assigned to. See more, and at a federally insured credit union the NCUA insures accounts up to $250,000.

Try It: Five Questions About Credit Unions

Think of your answer, then open each card to check it against the NCUA.

Who owns a credit union?

Its members, equally. It's a not-for-profit cooperative and issues no stock.

Who can join?

People within the field of membership set in the credit union's charter. Ask the credit union whether you qualify.

Where do its profits go?

Back to members. The NCUA says that generally means more favorable loan and savings rates at federal credit unions.

Who insures the deposits?

The NCUA's Share Insurance Fund, up to $250,000, at federally insured credit unions. The FDIC covers banks instead.

How are joint accounts covered?

A member's share of all joint accounts at the credit union is added together and insured up to $250,000.

How It Sounds at Home

  • "I bank at the credit union through my job."
  • "Their car loan rate beat the bank's."
  • "You have to be a member to open an account there."

The Breakdown

A short example. Rosa's employer lists a credit union in its benefitsBenefits packageEverything an employer offers on top of wages, such as health insurance, paid leave and a retirement plan, which can be worth thousands of dollars a year. See more packet, and her job puts her inside that credit union's field of membership. She joins, moves her checkingChecking accountA bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit. See more and savings over, and a year later takes out a car loanCar loanAn installment loan used to buy a vehicle, repaid in monthly payments over a set term, with the vehicle as collateral. See more there.

Where it goes wrong.

  • Her mother worries the money isn't insured, because the credit union doesn't show up when she searches the FDIC's list of banks. Credit unions have their own insurer: the NCUA's Share Insurance Fund covers federally insured credit unions up to $250,000.
  • Rosa assumes every rate there will beat a bank's. The NCUA says federal credit union members generally get more favorable rates, and "generally" leaves room for exceptions, so she still compares the APYAPYA yearly rate showing the total interest a deposit account pays, counting how often interest compounds, as defined by federal Truth in Savings rules. See more on savings and the APR on the car loan.
  • Her brother wants to join too. Whether he can depends on that credit union's field of membership, so he asks the credit union rather than assuming his sister's job covers him.

What to watch for.

  • Whether you fall within the credit union's field of membership.
  • That it's federally insured by the NCUA.
  • Fees, ATM access and rates, compared with other banks and credit unions near you.

Good to Know

The NCUA's Share Insurance Fund insures accounts at federally insured credit unions up to $250,000, and a member's interestInterest rateThe yearly percentage a lender charges for borrowing money, not counting fees; the APR adds certain fees to show a fuller cost. See more in all joint accountsJoint accountA bank or credit union account owned by two or more people, each of whom can usually deposit, withdraw, move money or close it. See more combined is insured up to $250,000 as well. According to the NCUA, the fund is backed by the full faith and credit of the United States, and no one has lost insured savings at a federally insured credit union. By law, a credit union can serve only people within the field of membership set in its charter. MyCreditUnion.gov, the NCUA's consumer site, explains how credit unions differ from banks.

FAQ

What is the difference between a bank and a credit union?

A credit union is a not-for-profit cooperative owned by its members; it issues no stock, and its profits go back to members. Deposits at a federally insured credit union are insured by the NCUA, while bank deposits are insured by the FDIC.

Who can join a credit union?

Anyone within its field of membership, which the credit union's charter sets. Ask the credit union or read its membership rules to see whether you qualify.

Is my money safe in a credit union?

At a federally insured credit union, the NCUA's Share Insurance Fund covers accounts up to $250,000 and is backed by the full faith and credit of the United States. The NCUA says no one has lost insured savings at a federally insured credit union.

Do It in Buhata

Accounts

Add your credit union accounts in Accounts next to any bank accounts, so every balance sits in one place.

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Related Terms and Categories

  • Checking account

    A bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit.

  • Savings account

    A bank or credit union account for money you're setting aside for later, which earns interest and is insured up to federal limits at insured institutions.

  • Joint account

    A bank or credit union account owned by two or more people, each of whom can usually deposit, withdraw, move money or close it.

  • APY

    A yearly rate showing the total interest a deposit account pays, counting how often interest compounds, as defined by federal Truth in Savings rules.

Household money and budgeting

Sources

MyCreditUnion.gov (NCUA), "How is a credit union different than a bank?"; MyCreditUnion.gov (NCUA), "Share Insurance"; NCUA, "Share Insurance Coverage"; NCUA, "Frequently Asked Questions About Share Insurance"; NCUA, "Share Insurance Fund Overview"

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