How To Join a Credit Union and Why You Should: A Step-by-Step Guide (2024)

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Only about one in three Americans use a credit union. If you’re one of the many Americans who has considered using a credit union in the past, there may be no better or easier time than the present.

But, what exactly are credit unions, how do they differ from traditional banks, and who might be a good fit for a credit union? Read on to learn all this and more.

What Is a Credit Union?

A credit union may seem like a bank, as it typically offers many of the same services. However, a credit union is a nonprofit financial institution owned by its members and operating on their behalf. Since credit unions don’t have the same profit motive of traditional banks, they generally offer lower interest rates and fees. They may also pay higher yields.

How You Can Join a Credit Union

Step 1: Eligibility:

One potential drawback of joining a credit union is that you may not be eligible. Many credit unions have eligibility requirements based on things like employer, geographical location, military experience or so on and won’t allow others to join. However, in many cases, those requirements can be gotten around, perhaps through family membership or even by donating a small fee. Many credit unions have also loosened their restrictions in recent years in an effort to draw in more customers.

Step 2: Documentation:

Once you’ve picked a credit union, most have requirements similar to traditional banks, such as the requirement to be at least 18 years of age. You should also expect to provide the following information to join:

• A driver’s license, state ID, or other government-issued identification like a passport
• A utility bill, mortgage statement, or other documentation verifying your address
• Social Security number or Taxpayer ID number

Depending on the credit union, you might also have to provide documents substantiating your eligibility. For example, if you are joining a credit union that’s tied to your employer, you’ll have to prove that you have a qualifying relationship with that company.

Step 3: Complete an Application:

Once you’ve got all your documents in order, you’ll have to fill out an application, either online or in-person. Although most credit unions have online capability these days, many prefer to visit a branch in person due to the community nature of a credit union.

Step 4: Fund Your Account:

The last step in opening an account at a credit union is funding your account. You can either bring in a check to your credit union or provide electronic banking information to make the transfer. This will include your account number at your bank and the institution’s routing number, also called its ABA number.

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Pros and Cons of Credit Unions

No financial institution is the right answer for everyone, as they all have pros and cons. Even individual credit unions are not the same as one another. But here’s a look at the general pros and cons that apply to credit unions.

Pros

• May offer higher APYs and charge lower interest rates
• May offer more personalized service
• Nonprofit institutions owned by members rather than shareholders
• Community-focused institutions that may offer local rebates and benefits

Cons

• May not have the international capability of global banks
• May not have an extensive branch network
• May have membership restrictions
• May not offer the widest variety of investment options or advanced estate planning or wealth management services

Something to note about credit unions is that while they still carry federal insurance, it is not technically the same as with traditional banks. While banks use the Federal Deposit Insurance Corporation, or FDIC, credit unions carry NCUA insurance, for the National Credit Union Administration. Both are backed by the full faith and credit of the U.S. government for up to $250,000 per depositor, so from the perspective of customers, there isn’t much of a difference. Still, it’s something that account holders should be aware of.

How To Choose a Credit Union

Sometimes, it’s the credit union that chooses the customer, and not the other way around. For example, if you’re considering joining Navy Federal Credit Union, you’re out of luck unless you’re a current or former member of the military, a Department of Defense civilian, or a family member of a qualifying military member.

In other cases, however, you’ll want to choose a credit union using the same criteria you would if you were vetting a traditional bank. While every customer has different needs and priorities, here are some of the factors you should consider when making your choice:

• Number and proximity of branch locations
• Fees
• Interest rates you pay on credit products like loans or credit cards
• Interest rates you earn on savings and/or checking deposits
• Range and depth of financial products offered
• Customer service accessibility and quality
• Fee-free ATM locations
• Mobile app
• Local discounts and benefits for members
• Customer reviews and testimonials
• Community involvement

Who Might Prefer Using a Credit Union

Credit unions can have great appeal to certain types of customers. Generally speaking, credit unions have more of a “small town” feel, as they are designed to help their community members. This means you might get more personalized service at a credit union. You may also get special rates on deposit accounts or lower interest rates on products like auto loans or mortgages.

Credit unions might also be a better choice for those looking for a brick-and-mortar experience, as opposed to an online one, but who aren’t as comfortable with the big banks. Credit unions can straddle the line between the features of a full-service banking institution and the better rates and lower fees of an online bank.