Key takeaways
- Unlike banks, many credit unions often limit membership to eligible individuals on the basis of belonging to the same community, workplace or organization (though there are credit unions with unrestricted membership rules).
- Credit unions tend to offer lower fees compared to banks, but you should still compare fees and account minimums to find the best account options for you.
- Look for credit unions that pay out generous dividends, which is the credit union term for interest.
- Consider a credit union’s physical footprint along with its online and mobile platforms to gauge accessibility and ease of managing your money.
Credit unions are a good alternative for many people who want to bank somewhere other than a for-profit bank. By the end of 2024, there were 142.3 million credit union members, according to data from the National Credit Union Administration.
Whether you’re considering joining the millions who share a stake in a credit union or want to switch to a new one, it’s worth comparing your options to find the best fit. If you’re wondering how to choose a credit union, here are some factors to keep in mind.
1. Membership requirements
One of the primary distinctions between credit unions and banks is membership eligibility. Credit unions are not-for-profit institutions owned by their members, who typically share a common bond such as belonging to the same community, workplace or organization. SchoolsFirst Federal Credit Union in California, for example, serves current and former school employees.
When looking for the best credit union, check the eligibility requirements. Some credit unions have broad eligibility requirements, while others may be more exclusive.
Examples of common membership requirements include:
- Living within a certain city, state, or region
- Being or becoming a member of a particular club, organization, or group
- Belonging to a specific church or religious group
- Working in a specific field or for a specific employer
- Living with or being directly related to an existing member
2. Range of products and services
While credit unions generally provide standard products like checking and savings accounts, many also provide additional financial products such as:
- Loans
- Credit cards
- Mortgages
- Investment options
- Insurance
Plus, some credit unions may have greater variety among their account offerings, such as a wider range of share certificate terms (the equivalent credit union term for certificates of deposits).
Consider your financial goals and needs. If you anticipate needing a loan or mortgage in the future, ensure that the credit union offers competitive rates and favorable terms for these products. Similarly, if you’re looking to open a share certificate, make sure the credit union offers competitive certificate rates and a term that aligns with your timeline.
3. Fees and account requirements
Many credit unions offer lower fees compared to traditional banks, due to the fact that profits are redistributed back to members. It’s still important to review fee schedules carefully, though.
Common fees to consider include:
- Monthly maintenance fees
- ATM fees (especially if you frequently use ATMs outside the credit union’s network)
- Overdraft fees
- Money transfer fees
You’ll also want to consider minimum balance requirements. Some credit unions may require a minimum deposit to open the account or may impose penalties, such as charging a monthly fee, for falling below a certain balance. Often there’s a minimum balance needed to maintain membership with the credit union, too.
4. Dividends
All members of credit unions are shareholders, and profits are distributed to members in the form of dividends, which are interest payments. That means credit unions have the potential to pay out competitive rates on savings products.
It’s important to research the interest rates on savings accounts to see which credit unions have the best rates for savings, share certificates rates and interest-bearing checking accounts. That way, you can compare options and get the best return on your money.
5. Customer service and accessibility
Credit unions are known for their emphasis on providing personalized service and building relationships with their members. Consider looking into credit unions’ customer service hours and reviews.
In terms of accessibility, you’ll also want to consider branch locations and banking options. If you prefer to do most of your banking online or through mobile apps, make sure the credit union offers robust digital banking options, including features like online bill payment, mobile check deposit and easy account management.
6. Community initiatives
As non-profit organizations, credit unions emphasize community and seek to give back in a number of ways. They may do so by offering affordable financial services for their members, providing educational resources, and participating in charitable giving. For this reason, you may want to choose a credit union that supports values and causes you care about.
You can start by looking for credit unions that are associated with existing memberships, organizations, occupations or communities you’re involved in. For example, if you’re an educator, you may consider credit unions for teachers and school employees. Likely, these credit unions support educational initiatives.
Alternatively, you can make a list of credit unions you’re eligible for and then look into the causes they support. Many credit unions have a page on their website dedicated to community involvement and provide links to impact reports, annual reports, and other relevant documents.
Credit unions vs. banks
In addition to learning what to look for in a credit union, don’t forget to compare credit unions to banks. Here are some of the advantages of choosing a credit union over a bank and a look at what credit union members might be missing out on that a bank can offer.
| Credit unions | Banks |
|---|---|
| Member ownership: Credit unions are owned by their members, giving you a voice in the decision-making process and the opportunity to participate in its governance. | Large branch and ATM networks: National banks offer much larger branch and ATM networks than credit unions do. |
| Personalized service: Members typically have close relationships with their credit unions and can receive personalized advice and solutions tailored to their needs. | No membership requirements: Though you may have to meet a minimum deposit requirement to open a bank account, banks don’t have specific criteria for customers to join. |
| Competitive rates: Many credit unions may offer higher rates than traditional banks in the form of dividends. Though you might find higher rates with online banks. | Technology and innovation: While credit unions are making progress in terms of technological advancements, they may not offer the same level of digital banking innovation as larger banks. |
| Community focus: Credit unions are often deeply rooted in their communities, supporting local initiatives and giving back through scholarships and programs. |
Bottom line
Learning how to pick a credit union involves carefully considering factors that impact your ability to bank effectively and enjoy the most rewarding experience. Credit unions offer numerous advantages, including member ownership, personalized service and competitive rates. Assess these factors against your financial needs and goals, and make sure you’re eligible to join the credit union of your choice.
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