Is there a downside to joining a credit union?
Limited accessibility. Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network such as Allpoint or MoneyPass.
While joining a credit union likely won't affect your credit score in and of itself, some of the financial products offered by credit unions can have an impact on your score.
For decades, bankers have objected to the tax breaks and sponsor subsidies enjoyed by credit unions and not available to banks. Because such challenges haven't slowed down the growth of credit unions, banks continue to look for other reasons to allege unfair competition.
Higher returns, better savings, low interest on borrowings, and a sense of community – these are just a few of the benefits of credit union membership.
The main benefits of a credit union vs. a bank are that credit unions tend to offer better rates and customer service, lower fees, and a national network of ATMs. However, a bank may offer more branches and products than a credit union.
While the individual options may differ from one to the next, most credit unions offer custom loan programs designed to help borrowers establish credit for the first time or rebuild damaged credit. Some credit unions use aptly-named “credit builder loans” that function much like secured credit cards.
A bank or credit union may make a soft inquiry on your credit when you open a new checking account to check for a history of fraud. These soft checks do not affect your credit score. However, in some cases, a bank may perform a hard credit check, which does affect your credit score.
Experts told us that credit unions do fail, like banks (which are also generally safe), but rarely. And deposits up to $250,000 at federally insured credit unions are guaranteed, just as they are at banks.
Like banks, which are federally insured by the FDIC, credit unions are insured by the NCUA, making them just as safe as banks.
Credit unions operate to promote the well-being of their members. Profits made by credit unions are returned back to members in the form of reduced fees, higher savings rates and lower loan rates.
Which is safer NCUA vs FDIC?
One of the only differences between NCUA and FDIC coverage is that the FDIC will also insure cashier's checks and money orders. Otherwise, banks and credit unions are equally protected, and your deposit accounts are safe with either option.
Personalized customer service
Since credit unions are not-for-profit institutions, they can focus on helping members with their individual financial needs. Some credit unions also provide training and counseling to help members understand complex financial matters.
Credit unions are owned by their members, so members are usually the focus of the institution. This means that credit unions are generally known for providing better customer service than banks. Nonprofit structure means better rates and lower fees.
Generally speaking, credit unions are safer than banks in a collapse. This is because credit unions use fewer risks, serving individuals and small businesses rather than large investors, like a bank.
Any income the credit union generates through interest, fees and loans is then used to fund community projects, reinvest into the organization or provide services that directly benefit members, like paying higher savings interest rates.
The FICO Score is used by most lenders, and typically ranges from 300 (very poor) to 850 (exceptional). However, there are numerous FICO scoring models, and each of the three nationwide credit bureaus has its own FICO variation.
You need a credit score of 700+ to get a credit card from most credit unions, though some credit unions have options available for people with bad credit or no credit history. There are credit union cards for every credit level, and some of the best credit union cards are only available to people with excellent credit.
However, because credit unions serve mostly individuals and small businesses (rather than large investors) and are known to take fewer risks, credit unions are generally viewed as safer than banks in the event of a collapse. Regardless, both types of financial institutions are equally protected.
The downside of credit unions include: the eligibility requirements for membership and the payment of a member fee, fewer products and services and limited branches and ATM's. If the benefits outweigh the downsides, then joining a credit union might be the right thing for you.
This depends on your financial situation. For those with a good credit score — around 670 and up — a $30,000 personal loan may be pretty easy to get.
Why would a credit union deny membership?
For example: A history of writing bad checks. Some people are listed in a database of customers who have been identified as having mishandled checking accounts in the past, which means the bank or credit union is less likely to let them open a checking account. Failure to provide adequate identification.
Liquidity Risk: The risk of not having sufficient liquid assets to meet the credit union's short-term obligations, which could impact its ability to function effectively and serve its members. Interest Rate Risk: Credit unions often have a significant portion of their assets and liabilities tied to interest rates.
- Best overall: Alliant Credit Union.
- Runner-up: PenFed Credit Union.
- Best for high APY: Consumers Credit Union (CCU)
- Best for low-interest credit cards: First Tech Federal Credit Union.
- Best for military members: Navy Federal Credit Union.
If a credit union is placed into liquidation, the NCUA's Asset Management and Assistance Center (AMAC) will oversee the liquidation and set up an asset management estate (AME) to manage assets, settle members' insurance claims, and attempt to recover value from the closed credit union's assets.
From a consumer perspective, the major benefit of the FDIC is its insurance coverage of up to $250,000 per depositor. This insurance provides peace of mind that money won't be lost should a bank fail. While credit unions aren't covered by the FDIC, their deposits are insured.