Everyone sees the ads on televison telling them that they should be joining one of the United States 87 million people who belong to credit unions as soon as possibile in order to maximize their returns on checking and savings account, but what exactly are federal credit unions? Federal credit unions are regulated by the U.S. government, and are just as safe as banks. Yet, before switching over, make sure you understand what the differences are between the two. Federal credit unions are different from banks in that credit unions are a member owned and controlled entity. Immediately upon knowing this, they sound like a smarter bet for the average consumer than a corporate bank which exists to turn profit for people besides the customers.
A credit union is a not-for-profit entity. Not to be confused with a non-profit, the credit union is required to turn a small profit in order to maintain the services they offer their clients. They must be turning a profit in order to continue to pay for things such as overhead, and the development of new services. However, since they are not tasked only to turn as large a profit as possible, they are able to offer lower rates on products such as loans and credit cards, and higher rates on products such as savings accounts and certificates of deposit.
The members of the credit union have a good deal of control over the way the credit union operates. The members elect a board of directors in a direct election where each member has one vote towards the board. This allows all of the members of the credit union to directly affect the way the credit union is run, and have a direct impact on the goods and services offered. This board of directors sets the credit unions policies regarding rates on services, and the types of services offered, so members of the credit union need to be responsible for actively monitoring the votes of the people on the board of directors in order to ensure that their views align with the way the board is voting.
Many credit unions limit their membership to a particular organization or trade union. In the United States, the largest federal credit union is the Navy Federal Credit Union, which serves members of the Department of Defense, and their relatives and familes. The Screen Actor's Guild, Teamsters, and many other unions also operate credit unions as a benefit to their membership.
Feederal credit unions also maintain deposit insurance for accounts up to $250,000 through the National Credit Union Share Insurance Fund (NCUSIF). This means that all of the money you have in a credit union up to $250,000 is completely safe in the event of the credit union shutting down, or an unexpected tragedy. This limit is the same as the insurance that banks carry on deposited funds, so you can be assured there is no additional risk in putting your money in a credit union. With their many financial advantages, federal credit unions are often the smarter alternative to traditional banks.