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What is a credit union?
A credit union is a nonprofit, member-owned financial cooperative — instead of shareholders, the people who bank there are the owners, and profits flow back as lower loan rates, higher savings rates, and lower fees rather than dividends to outside investors. To join, you generally need to qualify under the credit union's field of membership (an employer, geography, or affiliated association).
The full picture
A credit union is a not-for-profit financial cooperative owned by its members, not by outside shareholders. Every account holder is technically a part-owner with voting rights on the credit union's board — which is why deposits at a credit union are called "shares" rather than deposits, savings accounts are "share accounts," and CDs are "share certificates." Because there are no external shareholders demanding a profit, credit unions return earnings to members in the form of lower loan rates, higher savings APYs, and lower or waived fees compared to a typical for-profit bank.
How credit unions are insured
Federally insured credit unions are covered by the National Credit Union Administration (NCUA) through the National Credit Union Share Insurance Fund (NCUSIF) — not the FDIC, which insures banks. The coverage amount is the same: up to $250,000 per member, per insured credit union, per ownership category, with separate coverage for IRA and retirement accounts. The Share Insurance Fund carries the same full-faith-and-credit backing of the US government as FDIC insurance, and no member has ever lost insured funds at a federally insured credit union.
Membership — the main thing that's different
Unlike a bank, you can't just walk in and open an account at any credit union — you have to qualify under its "field of membership," typically defined by your employer, your geographic community, a professional association, or a family member's existing membership. Many credit unions have broadened their field of membership significantly (some let you qualify just by joining an affiliated nonprofit for a small one-time donation), so it's worth checking eligibility even if you don't work for an obvious sponsor employer.
Where credit unions tend to win — and where they don't
- Loan rates: Federal credit unions operate under an NCUA-set interest-rate ceiling on federal credit union loans — historically capped at 18% APR, well below what many bank and fintech personal loans charge at the high end of their range.
- Fewer, lower fees: Overdraft, monthly maintenance, and ATM fees tend to run lower at credit unions on average, since there's no shareholder profit target to hit.
- Fewer branches/ATMs: Most credit unions have a smaller physical and ATM footprint than a national bank, though many participate in shared-branching and surcharge-free ATM networks that partly offset this.
- Technology: Larger banks and online banks often out-invest smaller credit unions on mobile app features, though this gap has narrowed significantly.
Sourced
- The NCUA's Share Insurance Fund insures credit union deposits up to $250,000 per member, per insured credit union, per ownership category — the same coverage level as FDIC bank insurance. — NCUA — Share Insurance Fund Overview
- Federal credit unions operate under an NCUA Board-set interest-rate ceiling on loans, historically maintained at 18% APR. — NCUA — Federal Credit Union Act interest-rate ceiling
Key takeaways
- A credit union is a nonprofit cooperative owned by its members; a bank is a for-profit company owned by shareholders.
- Credit union deposits are NCUA-insured up to $250,000 per member, per institution, per ownership category — matching FDIC bank coverage.
- You must qualify under a credit union's field of membership (employer, geography, or affiliated association) to join.
- Federal credit union loan APRs are capped by an NCUA-set ceiling, historically 18% — often lower than comparable bank or fintech loan rates.
- Trade-off: typically fewer branches and historically fewer tech features than large banks, though shared-branching networks narrow the access gap.
Frequently asked questions
Is my money safer at a bank or a credit union?
Neither — both are equally safe up to the insured limit. FDIC-insured banks and NCUA-insured credit unions both cover deposits up to $250,000 per depositor/member, per institution, per ownership category, with the same US government backing.
Can anyone join a credit union?
Not automatically — you need to meet the credit union's field-of-membership requirement, typically tied to an employer, a geographic area, or an affiliated association. Many credit unions have expanded eligibility broadly, so check the specific institution's requirements before assuming you don't qualify.
Do credit unions have online banking?
Most do, though the depth of features can trail large national banks at smaller credit unions. Many credit unions also participate in shared-branching networks and surcharge-free ATM alliances that offset having fewer of their own branches.
Published 2026-08-17 · Updated 2026-08-17 · https://clearvaluelending.com/answers/what-is-a-credit-union