Understanding Credit Unions in the United States - A Beginner's Guide

Credit unions in the United States are member-owned, not-for-profit financial cooperatives that provide financial services to their members. They are a great alternative to traditional banks.

The National Credit Union Administration (NCUA) is the primary regulator of credit unions in the US, with a mission to ensure the safety and soundness of credit unions. It was established in 1934.

Credit unions are typically formed by groups of people with a common bond, such as employees of a company, members of a church, or residents of a community.

Related reading: How Do Credit Unions Work for Car Loans

Credit unions in the United States can be chartered by either the federal government or a state government. Delaware, South Dakota, and Wyoming don't regulate credit unions at the state level, so they need a federal charter to operate.

The National Credit Union Share Insurance Fund (NCUSIF) provides deposit insurance of at least $250,000 per member for 95% of state-chartered credit unions and all federal credit unions. This insurance is backed by the full faith and credit of the US government.

As of 2016, the NCUSIF insured over $1 trillion in deposits at 5,785 credit unions, while the FDIC insured over $13 trillion in deposits at 5,980 banks and thrift institutions.

Recommended read: Climate Change and Insurance in the United States

Credit unions in the United States have traditionally aligned themselves with state credit union leagues, followed by national affiliation with the Credit Union National Association (CUNA) of Madison, Wisconsin.

Federal credit unions may also choose to join the National Association of Federal Credit Unions (NAFCU) for additional support and resources.

Participating in a credit union service organization (CUSO) allows credit unions to provide shared resources and additional services to customers, such as business and commercial real estate lending.

Credit unions with a focus on serving low- and moderate-income people and communities often join the National Federation of Community Development Credit Unions, a national trade association based in New York, New York.

Here's an interesting read: Federal Credit Union Checking Account

Credit unions in the United States can be chartered by either the federal government or a state government. The states of Delaware, South Dakota, and Wyoming do not regulate credit unions at the state level.

All federal credit unions and 95% of state-chartered credit unions have share insurance, which provides deposit insurance of at least $250,000 per member through the National Credit Union Share Insurance Fund (NCUSIF).

Additional reading: Health Insurance Coverage in the United States

The NCUSIF is backed by the full faith and credit of the United States government and is administered by the National Credit Union Administration. This means that depositors can rest assured that their funds are protected in the event of a credit union's failure.

As of December 2006, the NCUSIF had a higher insurance fund capital ratio than the fund for the Federal Deposit Insurance Corporation (FDIC). This indicates that credit unions are well-protected and stable.

The National Credit Union Share Insurance Fund insured more than $1 trillion in deposits at 5,785 not-for-profit cooperative US credit unions as of the end of 2016.

Intriguing read: How Are Commercial Banks Different from Credit Unions

Bank conversions have been a contentious issue in the credit union industry. Since 1995, over 30 US credit unions have converted from credit union charters to bank charters.

These conversions are often initiated by a credit union's leadership team, rather than the rank-and-file membership. This has led to sharp controversy within the credit union industry.

Credit union conversions have been lucrative for executives and directors, with CU Financial, a consulting firm, estimating that a payoff in the "$1.2 million range for each director is not out of the question."

Executives might also expect additional stock compensation, which could lead to a "$10 million-plus ownership stake for a capable CEO".

Members of at least six credit unions have organized to oppose their management's conversion proposals, citing that insider enrichment comes at the detriment of credit union members.

Most members have lost their ownership stake without compensation, and face worse rates and fees after the conversion.

Quorum Federal Credit Union has a unique structure that sets it apart from other financial institutions. It's a credit union, which means it's member-owned and not-for-profit.

To become a member, you need to be an employee of a Select Employee Group-affiliated company or a member of the American Consumer Council or Select Savers Clubs. The American Consumer Council membership is free, and Quorum will even cover the $5 cost for a lifetime membership with the Select Savers Clubs.

Quorum has a large network of 90,000 free ATMs through MoneyPass ATMs, Allpoint ATMs, and ones at many CVS and Walgreens locations. This is a significant advantage for those who need to access their money on the go.

Quorum's accounts have some fees associated with them, such as overdraft fees as high as $37. However, it doesn't charge a fee for 10 out-of-network ATM withdrawals each month, after which it charges $2 per withdrawal.

Here are some key facts about Quorum's structure and regulation:

Quorum's term accounts, also known as CDs, come with nine term options and pay high interest rates. However, interest compounds monthly, not daily, which may be a drawback for some.

Signature Federal Credit Union is a notable example of a credit union that offers competitive interest rates and flexible membership requirements. They offer a dividend-earning checking account that pays a great rate on balances up to $20,000.

Their membership requirements are relatively straightforward, and you can join by becoming a member of the American Consumer Council for $8 per year. You can also join if you're an employee of certain companies, a Marymount University Alumni Association member or employee, or a U.S. Postal Service postmaster or supervisor.

One of the benefits of joining Signature Federal Credit Union is access to over 5,000 shared branches and tens of thousands of free ATMs through the Co-op and CULIANCE networks. This can be a huge convenience for people who like to manage their finances on the go.

Here are some key facts about Signature Federal Credit Union's membership requirements:

Overall, Signature Federal Credit Union offers a range of benefits and flexible membership requirements that make it a great option for people looking for a credit union that meets their needs.

Credit unions in the United States offer a range of benefits and features that make them an attractive alternative to traditional banks.

You can find high-yield bank accounts at many credit unions, which is a great option if you're looking for a high-interest savings account.

Some credit unions provide 24/7 live customer service, which is a big plus if you need help outside of regular business hours.

If you're not a U.S. citizen, you might be able to use a foreign ID or ITIN number to open an account at a credit union that allows it.

For more insights, see: Highest Limit Credit Cards for Fair Credit

Credit unions typically pay higher interest rates on deposits than banks, and charge lower interest rates on loans. This means that credit unions often have a higher "cost of assets" than commercial banks.

United States credit unions have a higher aggregate cost of assets than commercial banks in eight out of thirteen years between 1995 and 2007. This is because credit unions pay higher interest rates on deposits, which are called "shares".

A credit union's policies governing interest rates and other matters are set by a volunteer Board of Directors elected by and from the membership itself. This ensures that the interests of the members are represented.

In order for credit unions to stay solvent, their revenues from loans and investments must meet or exceed their operating expenses and dividends. This is a key consideration for credit unions in setting their interest rates and other policies.

Explore further: Commercial Banks Savings and Loan Associations and Credit Unions

Credit unions generally offer the same types of bank accounts as banks, including personal deposit accounts like share savings accounts and share checking accounts, CDs, and money market accounts.

They might not offer as many different types of accounts as banks, but you can still find a variety of options to suit your needs.

Credit unions often have better bank account interest rates, as well as better mortgage rates and other loan rates, because they are member-owned.

This can be a big advantage for people who are looking for a more personalized banking experience.

Some credit unions offer lower fees on their banking products, which can save you money in the long run.

It's worth shopping around to find a credit union that meets your needs and offers the services you want.

Business banking options, like business savings and checking accounts, are also available at many credit unions.

This can be a great option for small business owners or entrepreneurs who need a more flexible banking solution.

For more insights, see: The History of American Banking

However, some credit unions may have restrictions on opening certain types of accounts, such as business checking accounts, if you don't live in the same state as their branches.

This can be a problem if you need to open an account in person, but it's not a deal-breaker if you can find a credit union that offers online banking or a shared branch system.

Blue Federal Credit Union offers a range of benefits that make it an attractive option for those looking for a reliable financial institution.

You can easily become a member by donating $5 to the Blue Foundation, and you'll also qualify if you work for a Select Employee Group or one of several armed forces groups.

With 20 branches in Colorado and Wyoming, you can bank online, visit branches in these states, or visit shared branches around the US.

The credit union has a large network of 30,000 shared branches and 5,000 free ATMs in the Co-op network, making it convenient to access your money.

Blue Federal Credit Union pays high interest rates on certificates, and dividends compound daily, giving you a higher return on your investment.

One of the standout features of Blue Federal Credit Union is its 24/7 live customer service, ideal for those with non-traditional work schedules.

Here are some key features of Blue Federal Credit Union: