Between the 2008 banking crisis and the recent Wells Fargo fiasco, it’s easy to be skeptical of banks. If you don’t like big banks, there’s an alternative, though: credit unions. Credit unions have become increasingly popular, but there are still a lot of misconceptions about how they work and what they offer.


Myth: Credit Unions Don’t Make Money

Banks are for-profit institutions that make money from their customers, like any other business. Credit unions work a little differently. Like banks, they still keep your money and offer loans such—but they’re not for profit and have “members” instead of customers. When you open an account at a credit union, you become a member and part owner, which basically means you get to vote on the Board of Directors.


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Traditionally, many credit unions also aim to support their community, promote financial literacy, and offer financial counseling. However, as one reader pointed out, none of this is to say that credit unions aren’t interested in making money:

It’s not like credit unions rely on donations like charities or other non-profit organizations. Credit unions have to earn enough from loans and investments to pay for their operating expenses. Profit isn’t always a bad thing. Not only do they have to keep the lights on, but when their profits are higher, they can also offer their members lower interest rates on loans, and higher rates on savings. In short, they’re more likely to pass some of their savings and profits back to their members than simply churn the money into expanding operations or paying executive bonuses.

The priorities of credit unions may be different than banks, but they obviously still benefit when they open more accounts and increase their assets—and so do members.


Myth: It’s Hard to Get a Membership

Unlike banks, credit unions are more community driven, something that’s reflected in the history of the institution. They were meant to be an alternative to banking for people in specific industries, fields, or geographic locations. Many still work this way. There’s the Firefighters First Credit Union, for example, and the Pentagon Federal Credit Union.

“I don’t qualify for membership (or can’t open an account) is another common myth,” says Debbie Shepherd, Director of Member Experiences at Wescom Credit Union. “Although there are credit unions that serve a specific field of membership, there are also credit unions that serve a geographic location. Wescom is a community-based Credit Union so anyone who lives, works, worships, or goes to school in Southern California can join.”


Chances are, there’s a credit union in your area, too. You can search for one near you at ASmarterChoice.org. Credit unions are also flexible. For example, the Pentagon Federal Credit Union (a reader favorite) is open to members of the armed services, civilian DoD employees, and their families; however, you can also open an account with a one-time donation to Voices for America’s Troops or the National Military Family Association. Either way, you can plug your address into the Smarter Choice tool, and the site will populate a list of credit unions in your area.

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Myth: Credit Unions are Inconvenient

Credit unions have certain federal or state regulations that keep them from opening up however many branches or ATMs wherever they want all around the world. Sure, this can seem like an inconvenience at first, but credit unions also use shared branching, which means you can transact at totally different branches.


The Co-Op Credit Unions network allows credit union members to do business at 30,000 participating branches or ATMs around the country, which is double the amount of some national banks, Shepherd points out. You can search to see if a specific credit union is in the network here, and you can download their app (iPhone and Android) to search for ATMs or participating branches. It’s all super useful if you’re traveling or you’re a member of a credit union that’s based in a different city.

Many credit unions also offer digital banking now, too. Credit Union apps and services have a reputation for being behind big banks when it comes to conveniences like mobile check deposits and transfers, but they’re usually just as convenient. Many credit unions have apps that let members deposit checks, transfer balances, and do all the other stuff you’re used to doing with your large bank’s mobile app.




Myth: Credit Unions Aren’t Safe

Banks are insured by the Federal Deposit Insurance Corporation (FDIC). Typically, banks have $250,000 worth of FDIC coverage per customer. Basically, in case the bank fails, your assets are covered by the FDIC.


Credit unions don’t have FDIC coverage, which leads a lot of people to think they’re less safe than banks, but that’s not true. Your deposits are insured with the National Credit Union Administration (NCUA), which offers the same coverage. According to the NCUA, 98% of credit unions in the U.S. are federally insured with them, but you can check your specific credit union using their online tool.

Overall, most credit unions offer the same financial products as a traditional bank: checking and savings accounts, IRAs, and even credit cards. Even better, credit unions typically offer better rates and lower fees. And the loans they do offer often have better terms. For example, according to Debt.org, the typical interest rate of a credit union credit card is 11.61%, compared with an average rate of 12.59% for credit cards in general.


It’s not to say credit unions are perfect, but there’s a reason they’re becoming more popular: people are tired of banks, and credit unions seem to be a refreshing alternative. Plus, thanks to this increased interest, most credit unions have stepped up their game and now offer a lot of mobile conveniences and other perks. For the most part, most of the myths about credit unions are simply outdated.

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