A credit union may appear and offer the same financial products as a bank, but the two differ in their operations and benefits. Thus, you must understand how credit unions operate before becoming a member. This post highlights the basics of a credit union. 

What is a Credit Union?

Credit unions are non-profit financial institutions that operate on a membership basis. Essentially, the same people who use credit unions' financial products own the institutions. The members choose a board of directors to manage the institution and advance their interests. Primarily, credit unions serve their members by providing competitive products at lower rates than traditional banks. The members can access similar products like banks, including credit cards, savings and checking accounts, and loans. 

How Do Credit Unions Compare With Banks?

Credit unions look and operate like banks, but there are several differences. Primarily, credit unions are membership-based institutions, unlike banks. Then, credit unions are non-profit and aim only to retain a small operating margin compared to for-profit banks. Besides, credit unions are typically local with limited products, while banks operate nationally with various products. However, both institutions have deposit insurance. Thus, you have guarantees that you will not lose your money if the institutions close business. 

Pros of Credit Unions 

Credit unions enjoy narrower operating margins, generating only enough to fund daily operations. Thus, they offer lower interest rates on credit cards and loans to members. Also, credit unions maintain lower fees for their products. This way, you can save money on loans and services. Besides, members receive a higher yield on deposit accounts. Notably, the small nature of the credit unions and their community nature allows them to offer personalized customer services. 

Cons of Credit Unions

A significant limitation for credit unions is that membership is required. Thus, one must meet the eligibility criteria to enjoy the perks of membership. Then, credit unions have fewer products compared to banks. However, the available products are standard and offer more cost benefits than banks. Credit unions operate limited branch locations, limiting access to in-person banking. Fortunately, most credit unions have invested in online services.

How to Join a Credit Union

Credit unions have eligibility requirements for membership. However, the eligibility differs across the financial institutions. Credit unions used to admit members living or working in a specific place in the past. Today, credit unions are open to the general public as long as one meets individual requirements. Thus, you can join as an individual or through an affiliation with a group, labor union, or employer. Ordinarily, a member pays a one-time membership fee and opens an account with a small deposit. As a thumb rule, research the credit union's products and operational history before joining. 

If you need a credit card or a savings account, check out credit unions for better terms. Take time to shop around for a local credit union and check eligibility.

For more information on a credit union, contact a professional near you.