Credit unions are the unsung heroes of the banking industry, offering a refreshing alternative to traditional banks. While many people believe credit unions are exclusive clubs with strict membership requirements, the truth is that these days, almost anyone can join a credit union. And here's the kicker: you probably should.
While banks are at the mercy of their shareholders, credit unions operate on a not-for-profit basis. This means they're in the business of serving members, not worrying about quarterly profits. And this fundamental difference translates into a host of benefits that can make a significant impact on your financial well-being.
Mehdi Dinia, vice president of membership at Navy Federal Credit Union, explains the difference. “As a credit union, we’re member-owned and not-for-profit,” says Dinia. “This means any surplus of funds are returned to our members in form of dividends, lower rates and fees on lending products, exclusive discounts and improvements to our services.”
Credit unions can offer better rates and lower fees
One of the most compelling reasons to join a credit union is the potential for better interest rates on both savings and loans. While traditional banks can charge rates according to what the market is willing to pay, credit unions have their rates capped by the National Credit Union Administration (NCUA). For instance, the average interest rate on a credit card as of October 2024 was 21.76%. The NCUA caps credit union-issued credit cards at 18% APR.
Credit card offerings from credit unions not only have lower fees, they have some of the most attractive rewards structures in the business. Alliant Cashback Visa® Signature Card is just one example of an industry-leading rewards card that has no annual fee. The card offers 2.5% cash back on all purchases (on up to $10,000 in qualifying purchases each billing cycle, then 1.5%) with a qualifying Tier One Rewards status each quarter.
Credit unions also tend to have a more favorable fee structure. Many offer checking accounts with no monthly fees, no minimum balance requirements, and no direct deposit mandates – common stipulations at larger banks.
These savings may seem small, but they can add up to hundreds of dollars annually. Dinia shared that Navy Federal Members earn and save an average $461 per year by banking with the credit union.
Joining a credit union is easier than you think
According to Eric Bahl, vice president at PenFed credit union, there’s a common misconception about credit unions. “People think that in order to join a credit union, you need to be a part of a very specific group,” he said.
While it's true that credit unions have membership requirements, these have become increasingly inclusive over the years. PenFed, one of the largest in the country, allows anyone to become a member.
Other credit unions allow you to join by making a small donation to a specific nonprofit organization. Alliant is a large credit union that gives you free membership after you join the non-profit Alliant Foundation. The credit union will even make a $5 donation on your behalf.
Even those that have a limited membership base, such as Navy Federal Credit Union, have a wider list of who can join than you might expect.
“Our field of membership spans beyond current and retired members in all branches of the armed forces to include their families, household members and Department of Defense civilians,” says Dinia. “For example, a member’s spouse, parents, grandparents, siblings, children and grandchildren are eligible to join the credit union. And once they’re a member, they’re in for life.”
The TL:DR on credit unions
The words “non-profit” and “banking” may sound weird put together, but credit unions offer just that. When members, rather than stock market investors, are shareholders the rewards benefit not just the credit union, but account holders as well.
So, if you're looking for a financial institution that puts your interests first, it might be time to explore credit union membership. After all, in an era where anyone can join, the question isn't "Can you join a credit union?" but rather, "Why haven't you joined one yet?"
