MesquitaFMS/GettyImages; Illustration by Hunter Newton/Bankrate
When it comes to managing your finances, finding the right financial institution is crucial to ensure you’re getting the best offer and one that fits your situation.
Credit unions have gained popularity as an alternative to for-profit banks. By the end of 2022, there were 135.3 million credit union members — 10 years prior, that number was at 93.8 million, according to data from the National Credit Union Administration.
Whether you’re considering joining the millions who share a stake in a credit union or want to switch to a new one, here are some factors to keep in mind for choosing the best one.
1. Membership requirements
One of the primary distinctions between credit unions and banks is membership eligibility. Credit unions are not-for-profit institutions owned by their members, who typically share a common bond such as belonging to the same community, workplace or organization. SchoolsFirst Federal Credit Union in California, for example, serves current and former school employees.
Before selecting a credit union, ensure that you check the eligibility requirements. Some credit unions have broad eligibility requirements, while others may be more exclusive.
2. Range of products and services
While credit unions generally provide standard products like checking and savings accounts, many also provide additional financial products such as loans, credit cards, mortgages and investment options. Plus, some may have greater variety among their account offerings, such as a wider range of share certificate terms.
Consider your financial goals and needs. If you anticipate needing a loan or mortgage in the future, ensure that the credit union offers competitive rates and favorable terms for these products. Similarly, if you’re looking to open a share certificate, make sure the credit union offers a certificate term that aligns with your timeline.
3. Fees and account requirements
Many credit unions offer lower fees compared to traditional banks, due to the fact that profits are redistributed back to members. It’s still important to review fee schedules carefully, though.
Common fees to consider include:
- Monthly maintenance fees
- ATM fees (especially if you frequently use ATMs outside the credit union’s network)
- Overdraft fees
- Money transfer fees
You’ll also want to consider minimum balance requirements. Some credit unions may require a minimum deposit to open the account or may impose penalties, such as charging a monthly fee for falling below a certain balance. Often there’s a minimum balance needed to maintain membership with the credit union, too.
4. Dividends
All members of credit unions are shareholders, and profits are distributed to members in the form of dividends, which are interest rate payments. That means credit unions have the potential to pay out competitive rates on savings products.
It’s important to research the interest rates on savings accounts, share certificates and interest-bearing checking accounts. That way, you can compare options and get the best return on your savings.
5. Customer service and accessibility
Credit unions are known for their emphasis on providing personalized service and building relationships with their members. Consider looking into credit unions’ customer service hours and reviews.
In terms of accessibility, you’ll also want to consider branch locations and banking options. If you prefer to do most of your banking online or through mobile apps, make sure the credit union offers robust digital banking options, including features like online bill payment, mobile check deposit and easy account management.
Credit unions vs. banks
Here are some of the advantages of choosing a credit union over a bank and a look at what credit union members might be missing that a bank can offer.
| Credit unions | Banks |
|---|---|
| Member ownership: Credit unions are owned by their members, giving you a voice in the decision-making process and the opportunity to participate in its governance. | Large branch and ATM networks: National banks offer much larger branch and ATM networks than credit unions do. |
| Personalized service: Members typically have close relationships with their credit unions and can receive personalized advice and solutions tailored to their needs. | No membership requirements: Though you may have to meet a minimum deposit requirement to open a bank account, banks don’t have specific criteria for customers to join. |
| Competitive rates: Many credit unions may offer higher rates than traditional banks in the form of dividends. | Technology and innovation: While credit unions are making progress in terms of technological advancements, they may not offer the same level of digital banking innovation as larger banks. |
| Community focus: Credit unions are often deeply rooted in their communities, supporting local initiatives and giving back through scholarships and programs. |
Bottom line
Choosing the right credit union involves carefully considering factors that impact your ability to bank effectively and enjoy the most rewarding experience. Credit unions offer numerous advantages, including member ownership, personalized service and competitive rates. Assess these factors against your financial needs and goals, and make sure you’re eligible to join the credit union of your choice.
