Top 10 Credit Union Questions

By Penny Redlin September 15, 2021

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1. What is a Credit Union

A credit union is a financial institution like a bank, in that you can open a checking and/or savings account, take out a loan or apply for a credit card.  What makes a credit union unique, is that they are a non-profit, member-owned organization.

Credit unions are owned by their members, making them more inclined to create products and services to best serve the memberships needs.  Therefore a credit union will use its profits to reinvest back into the organization to help keep interest rates and fees low and to offer the members other competitive products versus traditional banks.

Since credit unions are in fact member owned, members must meet specific membership criteria to join, and the qualifications will vary by credit union.

2. Are Credit Unions Non-Profit

Yes.  Credit unions are non-profit financial institutions.  They qualify for non-profit status because they are owned by their membership and have volunteer Board of Directors comprised of members, while banks work to drive profits for shareholders.  This shift in focus from profits to service make credit unions a great option for anyone who values community, a shared mission and personalized service.

3. Are Credit Unions FDIC Insured

No.  Credit unions are not FDIC insured.  The FDIC (Federal Deposit Insurance Corporation) is an independent agency created by Congress to maintain stability in the nation’s financial system (such as banks). Nearly all credit unions are insured though.

Federal credit unions and some state credit unions are insured by the NCUA (National Credit Union Administration) also created by Congress to ensure deposits and protect members of credit unions.  State credit unions not NCUA insured can opt to be covered by private deposit insurance instead.

4. What’s the Difference Between a Bank and a Credit Union

While both offer very similar products such as checking and saving accounts, loans and credit cards, credit unions are different than banks. The characteristics that distinguish a credit union from a bank are its non-profit status and ownership makeup.

Credit unions are owned by the members it serves and works to address their interests.  Banks are owned by shareholders and serve customers and are measured by the profits they create for the shareholders.  Banks are also more likely to have a national presence whereas, credit unions tend to be regional if not local.  The number of branches for a given credit union will less than a bank in many instances. Some credit unions may be part of a CO-OP Shared Branches which will allow members to perform a range of transactions at another credit union.

5. Are Credit Unions Better than Banks

Whether or not a credit union is better than a bank will depend on personal preference.  Anyone can open a bank account, but credit unions require membership, and that membership is contingent upon meeting certain criteria.

If you meet the membership criteria and find the benefits of a credit union more desirable than that of a bank, then yes, they are better.  However, if you find comfort in the convenience of a large well-known bank with branches throughout the country and an array of products and services, then maybe a bank is better for you.  It all depends on your personal and financial needs and preferences.

6. What is a Federal Credit Union

Credit unions need a charter to operate.  The charter, or license to operate must be obtained for a credit union to start building its membership.  Credit unions are either chartered under the Federal Credit Union Act of 1934 or by their respective state government.

Federal credit unions will include “federal” in their name and are governed by the National Credit Union Administration and chartered under the Federal Credit Union Act of 1934. Some of the nation’s foremost credit unions are federal credit unions, with Navy Federal Credit Union being the largest.

7. How do Credit Unions Work

Credit unions work very similar to banks in that they accept deposits, offer loans, and provide a variety of other financial services such as credit cards, loans, and investment products.  However, unlike banks, their mission is to serve their member owners with products and services best suited to meet the memberships needs.

The patrons of the credit union collectively own the credit union.  Any profits earned are invested back into the organization or paid out as dividends.  Additionally, since a credit union is a non-profit institution, they enjoy tax-exempt status and can use those savings to offer their members lower interest rates on services offered.

8. How do you Join a Credit Union

As member-owned organizations, credit unions have set membership criteria that must be met to join.  In some cases, members need to work for a certain employer (the federal government for example in some cases), live in a particular area (could be a city or state) or belong to a specific school district, union or defined group.

Whatever the criteria, all members will have met it or be closely related to someone that is already a member to join.  While membership is required and specific criteria must be met to join, it is possible to find a credit union to join.

9. Do Credit Unions Offer Loans

Just like banks, credit unions offer loans.  Credit unions will use the deposits made by members to loan out money to its members.  The assets on hand might dictate loan limits for smaller credit unions.  That said, you can expect to borrow money for automobile purchases, mortgages, home equity, student loans, or personal reasons.  The interest rates for loans at a credit union can be lower than those at a bank and savings from processing fees may be enjoyed.  With its non-profit tax-exempt status, credit unions can use some those savings to offer better rates and lower fees to their member-owners.

10. Do Credit Unions Offer Student Loans

Yes.  Credit unions offer student loans.  Just like a bank, borrowers will need to have either a strong credit history or a creditworthy cosigner to qualify for the loan.  Similar to other student loans from private lenders, the amount borrowed cannot exceed your total cost of attendance for school in a given year.  Loan terms are likely to be similar to those at any other private lender.

Keep in mind, to take out a student loan from a credit union, you need to be a member of the credit union.  Shop around and look for a credit union that suits you best.  There are a number of credit unions that exist solely for the students at a given university or geographical area.  If it turns out you cannot find a credit union where you qualify for membership on your own, you may have a close family member that does.  If they join, you can join as well in most cases.  If you do happen to qualify for membership one way or another, you can join at the same time you apply for the student loan.

Apply for a University Credit Union Private Student Lending Solution

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Best for Private Loans

Interest Rates

Variable Rate Line of Credit: 1.99% APR – 11.49% APR¹

Fixed Rate Loan: 3.49% APR – 11.49% APR²

Repayment Terms

20 or 25 years for variable rate LOC^◊

15 years for fixed rate loan

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• Variable rate line of credit option allows you to apply once and secure funding for your entire college career.*
• Variable rates as low as 1.99% APR¹; Fixed rates as low as 3.49% APR²
• Personalized 1:1 support at every step of the lending process.
• In-school deferment option
• 15-, 20-, and 25-year repayment terms available^◊
• Cover any school-certified costs including tuition, housing, and books.

*Subject to credit qualification and annual review. Must continue to meet school’s Satisfactory Academic Progress (SAP) requirements. Credit union membership and minimum share deposit required.

**Approved schools subject to change without notice.

^The APR will not fall below the floor rate as stated in the account opening disclosure regardless of the index or any additional rate discount.

◊ Variable Rate Line of Credit Option: the repayment term is 20 years if your principal balance at repayment is $40,000 or less, and 25 years if your principal balance at repayment is more than $40,000.

Fixed Rate Loan Option: The loan term is a total of 15 years including a combined maximum of 4.5 years of in-school or grace period, and a repayment term of up to 10.5 years. Full repayment begins at the end of the grace period unless full repayment is selected during enrollment.

¹Variable Rate Disclosures

The Annual Percentage Rate (APR) for our undergraduate private education line of credit is variable and is based on the Prime index plus a margin. The current offered rate will be between 1.99% and 10.49% APR. The Annual Percentage Rate is subject to increase after consummation. The interest rate will be adjusted quarterly, based on changes to the Index. The APR will not exceed 18.00% or fall below the floor rate regardless of the Index or any additional rate discount. Any increase in the Index may increase the APR and the amount of your monthly payment. The "Index" for the quarter beginning July 1st, 2021, is 3.25%, which was the Prime index published in the Wall Street Journal on the first business day of June 2021. Current offered rate(s) are calculated by using the index, margin and floor value(s) in effect. Your specific interest rate, margin, floor, and/or credit approval depends upon the credit qualifications of the student borrower and co-borrower (if applicable). Margin will be disclosed at account opening. Student borrowers may apply with a creditworthy co-borrower which may result in a better chance of approval and/or lower interest rate.

²Fixed Rate Disclosures

The Annual Percentage Rate (APR) for our undergraduate private education loan is fixed for the life of the loan. The current offered rate will be between 3.49% and 11.49% APR. Your interest rate is fixed and your rate and/or credit approval depends upon the credit qualifications of the student borrower or cosigner (if applicable). Your actual rate within the range stated will be disclosed upon approval.

Student borrowers may apply with a creditworthy coborrower which may result in a better chance of approval and/or lower interest rate.

All loans subject to approval and restrictions may apply. We reserve the right to change rates for new applications at any time and without notice. Credit union membership and a minimum share deposit is required.