Everyone knows what a bank is, but credit unions remain slightly mysterious to many consumers. In this article, we’ll remove the mystery and point out how some of the best credit unions can fit into your financial lifestyle.
What is a Credit Union?
A credit union is a financial institution that provides many of the same products and services as banks, including checking, savings, credit cards and loans. The crucial difference is that credit unions are not-for-profit institutions run by and for the benefit of its members. Credit unions were created to promote thrift, provide low-cost financial services and to increase literacy within the community about the management of money.
There are two types of credit unions: Retail credit unions (also called natural person credit unions) serve individual consumers, whereas corporate credit unions (about 30 in the U.S.) are owned by retail credit unions. Credit unions can be federally or state chartered. Approximately 109 million Americans are credit union members as of November 2016. Deposits first exceeded $1 trillion in 2012, and the amount of capital owned by U.S. credit unions is $140 billion.
The first credit union was invented in 1852 in the Kingdom of Saxony (now a part of Germany) by Franz Hermann Schulze-Delitzsch. The concept spread through Europe quickly, but it wasn’t until 1908 that St. Mary's Bank Credit Union of Manchester, New Hampshire was founded as America’s first. St. Mary’s was a faith-based organization, but by 1910 the U.S. had its first secular credit union, and the first statewide credit union (in Massachusetts) launched in 1913. Today, there are about 6,000 federally-insured credit unions with $1.2 trillion in assets and $800 billion in net loans.
How Does Credit Union Membership Work?
To become a credit union customer, you first must become a member. The best credit unions are owned and controlled by their members in what is called a field of membership. Members get to elect each year the volunteer board of directors that manages the credit union. The democratically elected board sets the policies and practices of the credit union. Contrast this to a bank, in which stockholders own the company and professional managers run it.
Credit unions are not-for-profit institutions, but they do not rely on donations. They are set up as Section 501(c) organizations, and federal credit unions are governed by the Federal Credit Union Act. Credit unions finance themselves by earning interest on loans and returns on investments. As not-for-profits, credit unions do not pay income taxes. Because a credit union is a mutual organization, any surplus it earns is returned to its members in the form of higher savings rates, lower loan rates and reduced fees.
Most of the best credit unions admit members based on a set of criteria, such as:
Geographic location: Many credit unions are open to all residents, employees, students, military or worshippers within a geographic region.
Employer: Many companies set up their own credit unions for the benefit of their employees
Family: You can usually join a credit union if a family member is already a member
Affiliation: You may qualify to join a credit union based on your membership in a labor union, school, religious organization or homeowners’ association.
Almost everyone can be accepted in a credit union. You can visit CULookup.com to find the best credit unions near you.
You fill out an application (in-person or online) to become a member of a credit union. The application will ask you to prove that you are eligible to join. The remainder of the application elicits the information you would expect, including personal and employment data. If you are accepted, you must usually “purchase” one share (that is, deposit a nominal amount like $5) to become a voting member of the credit union. Most credit unions provide lifetime membership once you join.
Once you receive membership, you can select which services you want, including:
Auto and recreational vehicle loans
Checking accounts and ATM cards
Mortgages and home equity loans
Savings, money market and IRA accounts
Secured or unsecured personal loans
Travelers checks, money orders, certified checks and currency
Many of the best credit unions provide online banking, bill pay, and mobile banking. In addition, you’ll likely find a variety of membership perks, such as rebates, free tickets and contests.
List of the Ten Best Credit Unions Anyone Can Join
All these credit unions are NCUA-insured.
1. GTE Financial Credit Union: This credit union has been serving West Central Florida since 1935. It has 22 locations within the state, provides access to 30,000 ATMs nationwide, and is part of shared branch network of credit unions across the country. In addition, GTE Financial offers online banking, a mobile app, remote deposit capture and person-to-person payments. To can join the credit union by donating $10 to a non-profit educational club and opening a free checking or savings account with a minimum deposit of $5. Alternatively, you can join if you live within certain Zip codes, if you or a family member works for a community partner, or if a relative is already a member. GTE Financial pays 1.99 percent APR on share accounts and up to 2.01 percent APY on share certificates. It also offers money market accounts with an APY up to 0.30 percent. Loan APRs are 7.99 percent for a signature loan and 10.65 percent for a personal line of credit. The credit union also offers credit cards with APRs beginning at 8.49 percent for a Visa Platinum card, 8.99 percent for a Visa Business Platinum card and 16.99 percent for a Visa Secured card. Mortgages, student loans and car loans are also available.
2. Alliant Credit Union: Alliant has branches throughout greater Chicago and offers surcharge-free access to more than 80,000 ATMs. Members can bank online, over the phone or via a mobile app, with online services such as account management, money transfer, bill pay, credit score access, e-statements and budgeting tools. You can join Alliant by contributing $10 to Foster Care Success and open a savings account with a minimum deposit of $5. Other ways to join include employment at a qualifying company, membership in a qualifying organization, family membership, and living or working in a qualifying community. Alliant pays 1 percent APY on its savings account for balances of at least $100. Share certificates with terms of 12 to 60 months and a minimum deposit of $1,000 offer up to 1.85 percent APY. The credit union offers IRAs and Coverdell education savings accounts, as well as insurance policies for accidental death, life, home and automobile. You can get an Alliant Visa Platinum credit card with a 0 percent 12-month introductory rate and variable rates of 9.74 percent to 21.74 percent thereafter. The card charges no annual fee, works with mobile wallets and has no balance transfer fee. If you prefer, you can get a Visa Platinum Rewards card that charges an additional 2 percentage points but offers reward points and signup bonuses.
3. Affinity Plus Federal Credit Union: Founded in 1930, Minnesota’s Affinity Plus FCU has about two dozen locations throughout the state and offers fee-free access to 20,000 ATMs in the MoneyPass, COOP and SUM networks. It offers free checking with no minimum balance, no monthly fees, no fees on one incident of non-sufficient funds per year, and earned interest of up to 0.125 percent APY. Checks can be deposited via a mobile device and online bill payment is free. Membership Savings pays 1 percent APY on balances from $10 to $500 and 0.1 percent thereafter. Money market accounts pay up to 0.3 percent APY, and certificates offer from 0.25 percent for 3 months to 2 percent for 60 months. To become a member, you can donate $25 to the Affinity Plus Foundation (which supports financial education) and open an account with a minimum balance of $10. Other ways to join involve criteria of where you live, work, volunteer, worship or go to school. Affinity Plus offers some interesting perks, including rebates when you buy or sell a house, car-buying assistance, discounts on home and automobile insurance, discounted wireless plans, and integration with Quicken and QuickBooks.
4. Lake Michigan Credit Union: A Michigan schoolteacher, Lloyd F. Hutt, opened the Lake Michigan Credit Union (then called the Grand Rapids Teachers Credit Union) in 1933. Through growth and mergers, it became the biggest credit union in the state with assets exceeding $4 billion, and in 2015 it opened two branch offices in Florida, bringing the branch count to 38 and the ATM count to 55,000 (on the AllPoint network). Membership is open to anyone who contributes $5 to the ALS Foundation. You can also become a member if you live, worship, work or attend school in Michigan, or if a family member has an account with the credit union. The minimum starting account balance is $5. Lake Michigan Credit Union offers a free, unique Max Checking account that pays 3 percent APY interest on balances up to $15,000, subject to certain monthly usage requirements: at least one direct deposit, 10 debit card purchases, four home-banking logins and receipt of electronic statements. LMCU also offers a free, no-interest checking account and an investor checking account with tiered interest rates. The credit union’s savings account pays 0.25 percent APY, but requires a $300 minimum balance to avoid a monthly $5 fee. Share certificates are available paying up to 2.05 percent APY for 60 months, and you can earn 0.25 percent to 0.50 percent APY on money market accounts.
5. Connexus Credit Union: Connexus was founded in 1935 in Wausau, Wisconsin, under the name of Employer’s Mutual Credit Union. It has branches throughout Wisconsin, Ohio, New Hampshire and Minnesota. You can join by making a $5 contribution to the Connexus Association, a multi-purpose charity, or by meeting geographic or employment criteria. Connexus Xtraordinary Checking is free and pays 1.75 percent APY on balances up to $25,000, albeit with a few monthly requirements: 15 debit card transaction, one direct deposit, one third-party online bill payment, and receipt of electronic statements. MyRewards Checking pays 1.35 percent APY in return for less stringent usage requirements, whereas Innovative Checking is free, pays no interest and has no strings attached. Any checking account reduces the cost of a Connexus consumer loan by 1 percentage point APR. The credit union’s savings accounts pay 0.25 percent APY, and its money market rates vary from 0.50 percent to 1.15 percent APY. You can get share certificates in terms of 6 to 60 months with returns of 0.50 percent to 2 percent APY. Other products offered by Connexus include IRAs, health savings accounts, auto loans, mortgages, personal loans, student loans, recreational vehicle loans, home equity lines of credit and a variety of credit cards.
6. Northrop Grumman Federal Credit Union: The NGFCU began life in 1946 as the Northrop Aircraft Credit Union for the benefit of the company’s employees. The credit union went through some tough years following the economic crisis of 2008, but was on the rebound by 2015, with more than $1 billion in assets, almost $900 million in deposits and $500 million in loans. Headquartered in California, NGFCU has branches in many states, and also provides services through the CO-OP Shared Branch network. Surcharge-free ATMs are available at 30,000 locations, including 5,500 7-Eleven stores. A contribution to the Southern California Historical Aviation Foundation and an $8 deposit to a savings account secures membership, entitling you to free checking, cash back rewards, and discounts on travel. Other products include student loans, home loans and auto loans, as well as a Medicare supplement policy and insurance on home, auto, life, dental and vision. The regular savings account pays 0.25 percent APY and serves as overdraft protection for your checking account. NGFCU also offers a money market account paying 0.45 percent APY on $2,500 or more, and term certificates paying from 0.6 to 2.2 percent APY. The free checking account pays 0.1 percent APY on balances of $500 or greater.
7. American Heritage Federal Credit Union: AHFCU is based in Philadelphia, serving 151,000 members in Pennsylvania and New Jersey and more than 700 sponsor companies. The credit union has 33 branches and deposits of $1.8 billion. You can join by donating to the Kids-N-Hope Foundation – a charity that provides children with specialized care -- and depositing $15 in a savings account. Membership is also available based upon employment and geographic criteria. As a member, you get free checking, online banking, bill pay, a mobile app, and several rebates, rewards and discounts. The primary savings account pays 0.11 percent to 0.16 percent APY, and the credit union’s money market accounts pay 0.21 percent to 0.36 percent APY. Certificate APYs vary from 0.32 percent to 2.22 percent, as well as a special 4-month rate of 4 percent on balances between $1,000 and $2,000. AHFCU offers four different free, interest-bearing checking accounts (0.11 percent to 0.16 percent APY) with minimum balances varying from $0 to $7,500. The credit union’s accounts can be used in Apple Pay. AHFCU offers home, auto and student loans, as well as a trio of Platinum MasterCard credit cards. Insurance products are available for health, disability, life, home and auto coverage.
8. Melrose Credit Union: From its humble beginnings in 1922 as a Bronx storefront, Melrose Credit Union has become a large financial institution in New York State that has open enrollment for anyone making a $25 opening deposit and paying a $1 membership fee. Members get free checking, starter checks, online banking, bill pay, and access to free educational, legal and financial services. Melrose offers business services, kids’ accounts and student, home and auto loans. It does not offer credit cards. Savings accounts pay 0.50 percent APY, and share certificates with one- to five-year terms pay 1.41 to 2.32 percent APY. The E-Z Checking account has no fees or minimum balance, and pays 0.25 percent interest on balances of at least $500. A MasterCard debit card is available. Melrose in an approved Export-Import Bank lender and offers various business services. The credit union’s free EZ Legal Services offering includes health care proxies, powers of attorney, wills, living wills and funeral directives. Most other legal services receive a 30 percent discount. A Melrose Certified Financial Planner provides free advice on topics such as budgeting, wills and trusts, retirement, insurance, Social Security, annuities, long-term care, state planning, taxes and more.
9. NASA Federal Credit Union: Seven NASA employees started this credit union in 1949. It now serves 100,000 individuals in Florida and throughout the country. The credit union supports many worthy causes, including the Children’s Miracle Network, the National Kidney Foundation, the Special Olympics and the Leukemia & Lymphoma Society. To become a member of the NASA FCU, all you have to do is join the National Space Society, which is free. Once you join, you get free checking, one NSF fee waived per year, a cash-back debit card, mobile and online banking with bill pay, and access to 30,000 no-fee ATMs. In addition, members receive a rebate for buying or selling a home, as well as discounts on numerous products and services. The standard savings account requires a minimum starting balance of $5 and pays 0.1 percent APY. Free checking pays 0.05 percent APY, while five different savings accounts pay 0.10 percent to 0.15 percent APY. There are also five money market accounts paying from 0.25 percent to 0.55 percent APY, and share certificates shelling out between 0.25 percent and 2.00 percent. The NASA FCU offers student, home and vehicle loans, as well as health savings accounts and IRAs.
10. NuVision Federal Credit Union: NuVision FCU serves Southern California and the nation through the 6,800 branches of the CU Shared Branch Network and 28,000 ATMs across the country. The credit union offers personal and business accounts featuring online/mobile banking with bill pay, a loyalty rewards program, low mortgage rates, and discounts on tickets and services. You can join by donating $5 to the American Consumer Council and put $5 into an account. Checking is not free unless you maintain a $1,200 monthly average balance or receive $500 in direct deposits, and make at least seven debit card transactions per month. Two of the four checking accounts pay interest varying from 0.05 percent to 0.25 percent APY. Rates on the five savings accounts range from 0.10 percent to 0.40 percent APY, and those on money market accounts from 0.10 percent to 0.30 percent APY. You can earn from 0.25 percent to 2.2 percent APY on share certificates of various terms and minimum deposits. NuVision FCU is committed to online and mobile banking, offering Apple and Android apps, text message banking, bill pay, mobile deposits and POPmoney payments. Other offerings include a Visa credit card, insurance and home, student, personal and vehicle loans.
Five Largest Credit Unions with the Best Membership
Navy Federal Credit Union
The nation’s largest credit union in both membership and assets is Navy Federal. It serves 6.8 million members and manages $80 billion in assets from its headquarters in Vienna, Virginia. Founded in 1933, the credit union was initially limited to Navy employees who belonged to the Federal Employees’ Union. It was re-chartered as a federal credit union in 1947, and professional managers began running Navy Federal in 1951. In a series of steps, the credit union widened its membership, and today admits:
Department of Defense uniformed personnel, reservists, employees, officer candidates, and contractors
US Coast Guard personnel
Army National Guard personnel
Air National Guard personnel
Employees of Navy Federal
Relatives of members
Navy Federal offers a full array of products and services, and has carved out a niche among first-time home buyers, who represent the majority of its mortgage business. It has an employee base exceeding 13,000 and operates in all 50 states via 291 locations and online banking.
Navy Federal offers five checking accounts. Two are no-fee, and the other three waive fees if you meet direct deposit or average balance requirements. Four out of the five provide ATM rebates of $10 to $20 per month, and all include:
Access to thousands of no-fee ATMs
Free debit card
Free bill pay, remote checks and mobile banking
Online banking and statements
Interest income as high as 0.45 percent APY
Checking protection options, including checking line of credit and overdraft protection service
The share savings account pays 0.25 percent APY, but you can earn up to 0.60 percent from a money market account. You can arrange to cover checking overdrafts using your share savings account. Navy Federal offers a wide range of savings certificates with terms of three months to seven years and APYs of .45 percent to 2.05 percent. There is also a special 12-month certificate paying 3 percent APY. The certificates are available in IRAs and educational savings accounts as well.
Navy Federal offers three Visa and two MasterCard variable-rate credit cards. They all include easy payment options, zero fees for balance transfers, zero liability and 24-hour online account access. Rates vary from 8.24 percent to 18 percent APR. The credit union also offers prepaid cards and gift cards.
Other products and services offered by Navy Federal include business banking, mortgages, and loans for vehicles, students, individuals, and home equity. Mortgages from Navy Federal are attractive because:
You can choose among 30- and 15-year fixed-rate loans, FHA loans, VA loans, interest-only loans, and several different ARMs
Up to 100 percent financing with no mortgage insurance in some cases
Homebuyer’s Choice program waives the 1.75 percent origination fee in return for an interest rate increase of 0.375 percentage points
Expenses such as utilities and rent factor into the loan underwriting process
Minimum amounts for purchases and refinances are $10,000 and $19,000, respectively
Receive up to $5,050 cash back when use RealtyPlus free assistance program
You receive excellent customer service, which is valuable when applying for a VA mortgage or are in the midst of military deployment or relocation
Other perks of membership include:
$200 bonus to refinance car loan
Discounts on car purchases and rentals
Discounts on car insurance
Discounts on Visa card purchases
State Employees' Credit Union
North Carolina is the home of state-chartered State Employees’ Credit Union (SECU), the second largest U.S. retail credit union, with more than $35 billion in assets, $20.1 billion is loans, $2.7 billion in capital reserves and 1.9 million members. The credit union was launched in 1937 with an asset base of $437 and total membership of 17 individuals. The original headquarters was the basement of the Agriculture Building in Raleigh. Only North Carolina state employees, including county workers, members of the national guard, family members and retirees are eligible to join SECU. Applicants must also deposit at least $25 into a SECU account to gain membership.
SECU offers a broad range of personal banking services. The checking account includes a $1/month fee that is donated to the SECU Foundation, an organization that promotes community development, education, housing and health care within the state. It granted $4 million in 2009 to a new Nature Research Center at the North Carolina Museum of Natural Sciences.
Features of the SECU checking account include interest of 0.25 percent APY, no required minimum balance, 50 free checks per statement period, free overdraft protection for up to two incidents per year, free use of the CashPoints ATM network, online bill pay, a debit card and automated deposits. SECU also offers an interesting alternative to regular checking known as CashPoints Global, an electronic-only account that works with a pseudo-debit card called a CPG Visa card. There are no checks or overdrafts, as payments are limited to the actual balance in the account. The CPG card allows spending of up to $2,500 a day and a daily ATM withdrawal limit of $500. You can transfer money between this account and you other SECU accounts.
The SECU savings account pays 0.75 percent APY, but a Summer Cash savings account geared toward students pays an APY of 1 percent, as does the SECU money market account. Share term certificates from 6 to 60 months pay APYs of 1 percent to 1.75 percent. IRAs, Coverdell Education Savings Accounts and Health Savings Accounts pay an APY of 1.51 percent.
SECU offers a Visa credit card with a minimum APR of 8.25 percent. You can also obtain Visa gift cards, debit cards and the aforementioned CPG card. You can apply to SECU for a mortgage, home equity loan, personal loan, student loan and vehicle loan. You can also get a salary advance loan of up to $500 for an APR of 12.50 percent.
Pentagon Federal Credit Union
PenFed is headquartered in Alexandria Virginia and serves more than 1.5 million members throughout the country and on overseas military bases. It was founded in 1935 and now manages $21 billion in assets. Membership is available to:
Active and retired members of the armed forces, the Reserve and the National Guard
Employees of several federal departments, including Defense, Homeland Security and Public Health Service
Members of associations affiliated with the armed forces or veterans
Employees of the Pentagon building or any other defense or military-based institution
Members and employees of the American Red Cross
The PenFed checking account provides online and mobile access, as well as free ATM use at more than 57,000 machines. The account is free and pays 0.20 percent to 0.50 percent APY. It comes with overdraft protection, free online bill payment, mobile check deposit, a debit/ATM card and $0 liability.
Savings options include a regular savings account paying 0.05 percent APY, money market accounts with APYs from 0.05 percent to 0.15 percent, and 6-month to 7-year share certificates paying 0.85 percent to 2.38 percent APY. Coverdell education savings certificates of one to seven years pay 1.31 percent to 2.33 percent APY.
PenFed offers seven different co-branded credit cards from American Express and Visa. You can select ones that emphasize rewards or low rates. The credit union offers an array of loan products for home, vehicles, individuals and students. PenFed offers more than 20 different types mortgages, including fixed-rate, adjustable-rate, conventional and jumbo. The credit union also offers mortgage refinancing, home equity loans and home equity lines of credit.
Car-related products include new and used auto loans, balloon-payment loans, automobile refinancing and a car buying service.
PenFed offers an unusually large array of rewards and discounts:
Home: Real Estate Rewards will pay up to $10,000 of closing costs/origination fees if you use recommended real estate agents and title providers. You also can receive discounts on homeowners’ insurance, security systems and home warranties.
Auto: The car buying service provides an opportunity to save money through the TrueCar dealership network, including up to $1,000 reimbursement of insurance deductibles. Discounts are available on auto insurance, car rentals, tires and mechanical breakdown repairs.
Personal: Discounts on medical, dental, educational and life insurance costs. You can also receive wealth management services.
Retail: Discounts on cellular carriers, electronics, flowers and apparel
Boeing Employees Credit Union
BECU was established in 1935 by 18 Boeing employees in Tukwila, Washington with initial capital of $9. It’s first loan was for $2.50 to help an employee pay for tools. Today it serves almost a million members in the Puget Sound region with 45 branches and $15 billion in assets.
You can join BECU if you meet any of the following requirements:
Live, work, worship or attend school in Washington state
BECU and Boeing employees and retirees
Museum of Flight employee
Relative of members
The Member Advantage Checking account pays 4.07 percent APY on the first $500 and 0.05 percent APY beyond. Regular checking pays 0.05 percent APY. Both accounts are free of monthly, online banking and bill payment fees. A Gold Debit MasterCard with fraud monitoring protection and zero liability protection is provided. These accounts support mobile banking, remote check deposit, online banking, telephone banking, free usage of 30,000 ATMs, free e-statements and free alerts.
BECU pays 4 percent APY on the first $500 in its Member Advantage Savings account and 0.10 percent APY thereafter. Regular savings pays 0.10 percent APY. Money market APYs vary from 0.05 percent to 0.35 percent depending on balance. Share certificates from three to 60 months pay APYs ranging from 0.10 percent to 1.21 percent.
You can get a BECU Visa credit card with an APR as low as 7.15 percent. The card charges no annual fees nor fees for balance transfers, cash advances and foreign transactions. The balance transfer feature charges 0 percent on transferred balances and purchases for the first year. Afterward, the variable APR is 7.15 percent to 18.15 percent. BECU regularly reviews members’ credit ratings to update APRs. The credit card provides one reward point per dollar spent. Other benefits include $500,000 in worldwide travel accident insurance, compatibility with digital wallets, extended warranties, car rental collision damage waiver, and travel/emergency assistance.
BECU offers home equity/home improvement loans with variable rates as low as 3.99 percent APR, or 8.49 percent APR for a fixed rate loan. Home equity lines up to $500,000 are available, as are home improvement loans up to $25,000. FHA, VA, conventional and jumbo mortgages are available, as are loans for cars, boats, recreational vehicles and individuals – personal loans and personal lines of credit.
BECU offers a variety of ticket discounts to events in the Puget Sound area. It helps members get low-rate car financing deals at more than 140 dealerships throughout Oregon.
SchoolsFirst Federal Credit Union
One hundred twenty-five Santa Ana California school employees met in 1934 to create the Orange County Teachers Credit Union by pooling together $1,200. In 1983, they switched to a federal charter, and in 2008, it was renamed SchoolsFirst Federal Credit Union (SFFCU). Today, the credit union has more than 670,000 members and assets of about $12 billion. Those eligible to join include school employees and trustees, members of authorized educational foundations, retirees and immediate family members. A $5 deposit is also required. Members have free use of 28,000 ATMs through the CO-OP Network, plus free mobile and online banking and free online bill pay.
The Free Checking account has no monthly fee, no cap on check writing and no minimum-balance requirements. Investment Checking pays from 0.05 percent to 0.10 percent APY, but imposes a $3 monthly service charge unless you have a combined share balance of at least $1,000 and have at least one direct deposit a month. Alternatively, the fee is waived if you maintain a balance of $2,500 or if you’ve reached age 62.
The share savings account pays an APY of 0.10 percent, has no monthly fee, and provides unlimited deposits and withdrawals. SFFCU also offers a money market account with a $2,000 minimum balance and a top APY of 0.30 percent. If you are interested in share certificates, they are available in terms ranging from 30 days (APY of 0.20 percent with a $500 minimum balance) to 60 months (APY of 2.20 percent on balances of $100,000 or more).
You can choose from among four MasterCard credit cards with no annual fees and APRs of 8 percent to 17.90 percent. The maximum credit line available is $25,000. Available loans include overdraft protection loans, personal loans and payroll savings loans, as well as home and auto loans. There is also a certificate-secured loans that charges 2.5 percent above the share certificate dividend rate.
SFFCU offers insurance covering home, life, autos, long-term care and personal liability. In addition to mortgages, home equity loans and home equity lines of credit are available. The credit union has a number of special purpose loans for educators, including ones for computer hardware and software purchases, classroom supplies, uniforms and special curricula costs. You can set up several types of retirement accounts, including IRAs, 403(b)s and 457(b)s. Paycheck Planner allows teachers to distribute their paychecks over 12 months instead of the usual 10 or 11.
How Does a Credit Union Deposit Insurance Work?
Federally chartered credit unions are insured by the National Credit Union Share Insurance Fund (NCUSIF) and regulated by the National Credit Union Administration. The NCUA dates back to the New Deal, when President Roosevelt signed the 1934 Federal Credit Union Act that provided for the chartering of federal credit unions in all states. The NCUSIF was instituted in 1970 to protect money on deposit at federal credit unions. It is privately funded by the best credit unions, but it is backed by the full faith and credit of the United States. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 established the standard maximum NCUA deposit protection at $250,000 for each shareholder, per credit union and account ownership category. The insurance covers deposit accounts, but not losses suffered by investments in stocks, bonds, mutual funds, annuities and life insurance policies offered by credit unions or affiliated entities.
Additional NCUA insurance coverage applies to certain types of credit union accounts:
Trusts: Revocable and irrevocable trust accounts are covered by NCUA insurance. Revocable trusts may qualify for $250,000 coverage of each named beneficiary – this is separate from the owner’s coverage. Each beneficial interest in an irrevocable trust account also receives coverage up to $250,000.
Retirement accounts: The aggregate of credit union traditional/Roth IRA investments held by a member is insured for $250,000. Keogh accounts are insured separately for the same amount.
Joint accounts: These are also insured for $250,000 per joint account holder, separate from individual accounts. Thus, a joint account with two co-owners can be insured for up to $500,000.
You can deposit money into multiple credit unions if your deposits exceed the coverage limits at any one credit union.
Federally vs. Privately Insured Credit Unions
Today, the NCUA controls the NCUSIF covering more than 100 million account holders at all federal and most state credit unions. All federal credit unions have the word “federal” in their titles. In addition, credit unions headquartered in Arkansas, Delaware, South Dakota, Wyoming or the District of Columbia are federal credit unions. If a credit union doesn’t contain the word “federal” and is not headquartered in one of the enumerated states, it is probably a state-chartered credit union under the supervisory authority of the state in which the credit union’s main office is located.
All credit unions insured by the NCUSIF display the familiar NCUA logo on their websites and literature.
Some state-chartered credit unions use private insurance rather than the NCUSIF. This private insurance is not backed by the full faith and credit of the United States. Private insurers may also provide excess insurance coverage to NCUSIF-insured credit unions to cover losses above the federal limits. For example, one provider of excess insurance coverage, ESI Inc., covers more than 200 of the best federally-insured credit unions.
It’s up to you whether you care whether your credit union is insured by the NCUSIF or by a private insurer. However, you should always inquire about insurance coverage before you join a credit union so that you can make an informed decision. Some credit union members might prefer the lower premiums charged by private insurers even if it means giving up some margin of safety. Others want the highest level of protection, even if it costs more.
Pros vs. Cons of Banking with a Credit Union
The best credit unions compete directly with banks. They typically have a lower cost structure, because they are not-for-profit, are managed by volunteer members, and don’t pay income taxes. Here are the pros and cons of banking with a credit union.
1. Better interest rates: You will typically receive between four and 10 times higher rates on deposit accounts at the best credit unions than at commercial banks (but not online banks, which pay higher rates). This includes savings, checking and money market accounts. Credit unions often provide the best returns on certificates of deposit (share certificates).
2. Lower borrowing costs: Banks and credit unions both provide credit cards and loans, but those provided by credit unions cost less. Credit unions are often used for car loans because of their attractive rates. Their APRs on mortgages, credit cards and personal loans are usually lower as well.
3. Reduced fees: National banks count on collecting fees to meet their profit requirements, especially when interest rates are very low. Credit unions don’t make profits, and the money saved defrays costs that would otherwise require fees – check charges, withdrawals, electronic transactions, etc. Credit unions also offer free checking with no minimum balance or monthly service charge. It’s true that some of the best credit unions charge bounced-check fees, but those fees are smaller and in some cases forgiven.
4. Customer service: As a mutually owned organization, credit union members naturally adopt a customer-friendly focus, since all customers are members. In addition, credit union branches are usually small, so it becomes easy to develop relationships with the folks working there. Furthermore, credit unions have a tradition of offering financial education that banks seldom provide.
5. Flexibility: Banks function by the numbers – if your credit history isn’t good, you might not be offered a credit card. Credit unions take a more flexible approach and work with members, even ones with troubled histories, to find solutions.
6. Simplicity: Most offerings at most credit unions are simple, straightforward and easy to understand. You can get free checking, free savings, a debit card, and relatively good interest all for a $5 opening balance. “Free” checking at a bank may require large minimum balances plus a certain number of debit transactions and direct deposits each month.
1. Options: Credit unions frequently offer fewer options than do large banks. An average credit union might offer two credit cards, two types of checking and savings accounts, a single type of mortgage, etc. A large bank might offer dozens of credit cards, half a dozen checking and saving accounts, and a wide array of loan products. Only the biggest credit unions compete with banks in the number of options offered.
2. Fewer locations: Some banks have branches on every block and in every shopping mall. Credit unions, except for the largest, usually have fewer locations and perhaps fewer ATM machines. This can be an inconvenience, but is somewhat mitigated by good online and mobile banking facilities.
3. Online services: The biggest banks have been in the forefront of online banking and mobile banking apps. Smaller credit union may offer somewhat less sophisticated websites, and may not even offer a mobile app. However, credit unions are catching up as mobile apps become less expensive to develop.
Notable Credit Union Regulation in Recent History
The Consumer Financial Protection Bureau implemented in 2015 new regulations that affected financial institutions, including credit unions. The new rules, stemming from the Dodd-Frank Act, required credit unions to revamp the mortgage documents they provided pursuant to the Truth in Lending Act and the Real Estate Settlement Procedures Act (TILA-RESPA). This required new ways of disclosing information (such as issuing a Loan Estimate and Closing Disclosure in place of older types of documents) prior to and at a real estate closing, and new procedures were introduced.
Other recent regulatory news includes:
Risk-Based Capital Rule: A rule that takes effect in 2019 requires larger federal credit unions to make changes in how they measure risk and how much capital they must set aside. The rule will cause the larger companies to reserve more capital as a buffer against risk.
Liquidity Rule: This 2014 NCUA rule requires all credit unions to prepare liquidity plans, and some must establish access to the either the Federal Reserve’s discount window or the Central Liquidity Facility. These measures are meant to stabilize those that run short of funds.
Underwater mortgage relief: Another 2014 NCUA rule encourages federal credit unions to refinance or modify mortgages held on properties in neighborhoods with declining prices.
Online privacy notice: As of October 2014, credit unions can simply post their privacy notices online rather than mailing them to each member, as long as certain procedures are followed.
Trump “Knock Out” order: President Trump created an executive order shortly after taking office that limits executive agencies from issuing new regulations. The NCUA, which is working on proposals regarding fields of membership and alternative capital, is not an executive agency, but rather an independent regulator. Nonetheless, NCUA said will comply with the spirit of Mr. Trump’s order.
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