This blog is for educational purposes only, not an offer of credit or advertisement for current loan terms. It does not provide legal advice. Refer to our loan web pages or consult professional advisors for specific information.
A credit union is a not-for-profit financial institution that is owned by the people who use its services. Like traditional banks, a credit union may offer checking and savings accounts, loans, credit cards, digital banking, and other financial products
When you open an account with a credit union, you become a member and part-owner of the organization. This member-owned structure allows credit unions to focus on helping people manage, save, borrow, and grow their money.
How Does a Credit Union Work?
Credit unions operate as financial cooperatives, meaning their members collectively own the institution and benefit from the services it provides. Members deposit money into checking, savings, and other accounts. The credit union can then use a portion of those funds to provide loans to other members.
In simple terms, one member’s savings can help fund another member’s auto loan, mortgage, personal loan, or business loan. This creates a system of mutual support built around the financial well-being of the membership.
Because a credit union is not operated to generate profits for outside stockholders, earnings can be reinvested into the organization or returned to members through benefits such as:
- Lower loan rates
- Competitive savings yields
- Fewer or lower fees
- Improved technology and services
- Personalized financial support
Products, rates, fees, and eligibility requirements vary by credit union, so it is important to compare your options.
Differences Between Banks and Credit Unions
There are characteristics that separate banks and credit unions. To get the best for your circumstances and financial objectives, it's important to distinguish the differences between them.
Banks
Banks are owned by investors and are for-profit institutions. You can have accounts with a bank but won't have a voice in procedures or operations. Banks may also have larger national branch and ATM networks, depending on the institution.
Credit Unions
Credit unions are member-owned. That means customers who use the services, whether for personal accounts or business accounts, have some involvement in the institution's operations.
Many credit unions also have a strong local or community focus. They may provide financial education, support community organizations, serve small businesses, or offer products designed around the needs of people in their service area.
How to Choose Between a Bank and Credit Union?
The right option depends on the services, rates, accessibility, and support you value most. Comparing banks and credit unions more closely can help you understand how their ownership structures, fees, rates, and membership models differ.
What Services Do Credit Unions Offer?
Credit unions often provide many of the same products and services available through traditional banks.
- Checking Accounts: At a credit union, a checking account may be referred to as a share draft account. It can be used for everyday purchases, bill payments, ATM withdrawals, checks, and electronic transfers.
- Savings Accounts: A savings account may be called a share account because the deposit establishes your share of ownership in the credit union.
- Loans and Credit Cards: Depending on the institution, credit unions may offer:
- Business Banking: Some credit unions also provide business checking, savings, credit cards, lending, treasury management, and other tools to help local businesses manage their finances.
- Convenient Banking Tools and Account Access: Members may be able to manage their accounts online or through a mobile app, make digital payments, and use shared ATM or branch networks for easier access to their money.
Learn more about MIDFLORIDA’s service offerings
What Are the Benefits of Joining a Credit Union?
Membership benefits vary by institution, but credit unions may offer competitive rates, fewer fees, personalized service, and a stronger community focus. A closer look at the benefits of joining a credit union can help you decide whether membership fits your financial needs. Some benefits of credit union membership include:
- Personalized customer service: Being not-for-profit gives credit unions a lot more leeway with customized financial needs for members.
- Higher interest rates on savings: Products like savings accounts and CDs are eligible for higher interest rates as opposed to for-profit banks.
- Lower fees: Credit unions tend to offer lower fees.
- Lower loan rates: APRs are typically lower compared to banks.
- Community focus: There are usually requirements to become a member, such as living within the area of service or working for a common organization.
- Voting rights: Credit union members have the opportunity to vote on important corporate decisions, including choosing board members.
- Insured deposits: The National Credit Union Administration (NCUA) is a government-backed insurer for federal credit unions and some state credit unions.
Unlike conventional banks, credit unions provide services as a cooperative, encouraging the betterment of all members and communities. Being not-for-profit can grant them this greater freedom to prioritize their members as they aren't strictly obligated to the needs of their stakeholders.
Who Can Join a Credit Union?
Credit unions have membership eligibility requirements, sometimes called a field of membership or common bond. Membership requirements can vary from credit union to credit union, so it's best to speak with a team member of the organization to learn more. You may be eligible to join based on:
- Where you live, work, worship, or attend school
- Your employer or profession
- Membership in a school, association, or other group
- A relationship with an existing member
- Another requirement established by the credit union
MIDFLORIDA membership is available to people who live, work, worship, or attend school within its eligible Florida service area.
How Do You Open a Credit Union Account?
Start by confirming that you meet the credit union’s membership requirements. You can then review its accounts, rates, fees, deposit requirements, branch network, and digital banking services. To open an account, you may need:
- A valid photo ID
- A Social Security number or taxpayer identification number
- Your current address
- Proof of eligibility or residency
- An opening deposit
Once your account is established, you become a member and can begin using the credit union’s eligible products and services.
Find a Financial Institution That Fits Your Life
Choosing a financial institution depends on your priorities. Consider the products you need, the rates and fees offered, access to branches and ATMs, digital banking features, and the level of personal service available. Like any financial partnership, it's a good idea to research a credit union and its offerings because not all are the same.
MIDFLORIDA Credit Union provides credit services with a personal touch across Florida. Reach out to find out more about our services.
