You may have heard that many people like credit unions better than banks.
The nonprofit, member-owned financial institutions often have lower rates on loans and credit cards, higher rates on savings and fewer fees for checking accounts. To some, they also seem friendlier.
“I enjoy the small, personal touch that they give,” says Ron Lau.
Lau is one of an estimated 109 million members of the nation’s nearly 5,900 credit unions that held almost $1.4 trillion in assets as of May, according to the Credit Union National Association.
With so many choices, how do you pick the credit union that’s right for you?
Compare rates and fees, of course, but you should check out these criteria, too:
1. Can I join?
Anybody can join a credit union, but not necessarily any credit union. Each credit union serves its “field of membership,” a common bond among members, says , the website of the National Credit Union Administration.
Eligibility may be based on:
- Employer: Many employers sponsor their own credit unions.
- Location: Many credit unions serve anyone who lives, works, worships or attends school in an area.
- Family: Most credit unions allow members’ families to join. So if someone in your family is a member of a credit union, you may be eligible, too.
- Group membership: Churches, schools, alumni associations, labor unions and homeowners’ associations are among the types of groups that may define a bond.
For example, BECU in Washington state was founded in 1935 by 18 Boeing employees, but it had more than 1 million members, has more than $16.4 billion in assets and is open to all state residents and students attending Washington colleges and universities.
2. Does it offer services I need?
Start with the basics, experts say: Make sure that your credit union offers home lending services, issues credit and debit cards, provides auto loans, features a good savings program and offers financial counseling.
Are you looking for easy access to ATMs or branches nationwide?
“Because credit unions are not-for-profit, we cooperate with each other,” said Joyce Gaines, of Brightstar Credit Union. “Our members can go in other branches nationwide and access their accounts to make a deposit or withdrawal.”
Unlike big banks, most credit unions don’t have 24/7 call centers, so if that’s important to you, ask if banking is restricted to business hours. Also, if you need it, see if the credit union offers mobile apps to view your account balances, pay bills, deposit checks and send money online.
Maybe you’re looking for services such as investment, retirement and estate planning. Some credit unions offer personal finance help like their big-bank cousins, others don’t. So be sure to ask.
3. Which is the best located?
Online resources can help. MyCreditUnion.gov that identifies credit union branches by ZIP code or city, shows which have drive-thrus or ATMs, and provides details including address, phone number and website. Similar tools are available from and regional credit union groups, such as Pennsylvania’s . Most sites offer maps and directions to branches.
4. Will my money be safe?
The National Credit Union Administration (NCUA), with the backing of the U.S. government, operates and manages the National Credit Union Share Insurance Fund, insuring up to $250,000 for each member the deposits of all federal credit unions and the majority of state-chartered credit unions (many credit unions hold dual charters). Some state-chartered credit unions may insure their funds through private insurance companies.
You can via NCUA’s Financial Performance Reports. You will need to know its .
Things to look for:
- Peer average ratio: How the credit union compares with federally insured credit unions of similar asset size.
- Percentile rankings: How the credit union’s financial performance compares with federally insured credit unions in its peer group.
- Net worth: A capital level above 7 percent net worth is considered well-capitalized.
- Return on average assets: Measures net income (or loss) in relation to average assets and represents the bottom line.
- Delinquency: How many loans are late compared with total loans.
- Net charge-offs: An important indicator of the effectiveness of lending and collection practices.
5. How do I get started?
If you are eligible to join, you can easily become a credit union member by completing a membership application, depositing and maintaining the minimum par value of a share (generally ranging from $5 to $25), and paying a one-time membership fee if there is one.
Also, if you’re moving your business from a bank, ask if the credit union can make transferring easy with a switch kit. The time-saving packet of forms and information guides you through the process of switching and may include direct deposit forms, worksheets and checklists.
As Stacy Johnson notes, credit unions are a great solution for many people, but you still need to shop around and ask questions before you decide where you want to have your money relationship.
What’s your experience with credit unions? Share with us in comments below or on our .