The Benefits of Joining a Credit Union

Alamy Customers frustrated with bank fees might want to consider their options, including switching their money over to a credit union. According to the Credit Union National Association, more than 96 million Americans use credit unions, which generally offer higher savings rates and lower fees than traditional banks. Credit unions, which, unlike banks, are owned and governed by their members, are often misunderstood as exclusive financial institutions with limited services. They remain overshadowed by the size of banks, with banks holding $14.45 trillion in assets versus credit unions' $1.03 trillion, CUNA reports. The average size of a credit union ($149 million in assets) is also far smaller than that of the average bank ($2.2 billion in assets), as of 2012. But credit unions provide an array of services -- including free ATM use, electronic banking, loans and interest-bearing savings accounts -- and most Americans are eligible to join them. Here are answers to five common questions about credit unions: Am I eligible to join a credit union? While membership in a credit union depends on belonging to a particular community, such as a workplace, region or church, most consumers are eligible, even though many don't realize it. They might just need to investigate options within their communities. So how do you find one? Websites such as mycreditunion.gov can help. Also, ask around -- your employer, spouse's employer or local government can direct you as well. Do credit unions offer better interest rates? On average, credit unions offer lower rates on loans and higher rates on savings accounts -- just what consumers want. The National Credit Union Administration reports that five-year loans for new cars at banks have an average interest rate of 5.19 percent, compared with 2.87 percent for credit unions. The rate on savings accounts for both credit unions and banks was similarly low, at 0.14 and 0.13, respectively, as of June 2013, although typically credit unions offer higher rates of return. In March 2008, for example, the average rate of return on a regular savings account was 0.83 percent at credit unions, compared to 0.55 percent at banks. CUNA calculates that taken together, higher yields, lower rates and lower fees add up to about $5.8 billion total in benefits to members, or about $118 per member household in 2012. Are deposits insured the same way they are at banks? Yes. Credit unions are insured by the federal National Credit Union Administration, which provides the same protections that the Federal Deposit Insurance Corporation applies to banks -- insurance coverage on deposits up to $250,000. NCUA's website allows credit union members to check on their insurance coverage; the agency also recommends checking for a prominently displayed sign at the credit union that says it is NCUA-insured. Do credit unions ever collapse? Like banks, credit unions can fold, but that usually means they merge with another credit union. Regardless of what happens, members are protected through the NCUA insurance. NCUA says if a federally insured credit union fails, members typically receive payments for their deposits within three days. CUNA also reports that since the start of the downturn in 2008 through 2012, almost fourfold as many banks have failed as credit unions (465 versus 124). In 2012, 51 banks failed compared to 21 credit unions. What about financial literacy -- can a credit union teach me how to make smart money decisions?