Federal and non-federal credit unions: what are the differences? Federal and non-federal credit unions: what are the differences?

Federal and non-federal credit unions: what are the differences?

Credit Unions are institutions that are operated and owned differently from a bank, but as you do some research to see your options, you will find that some are listed as federal and some as non-federal. But, what’s the difference?

As opposed to banks, credit unions (federal or non-federal) are non-profit organizations owned by their members. This means that any loan you take, any account you open or any transaction you make, it also includes you. The earnings a credit union makes are paid back to their members as higher saving rates and lower interest rates on loans.

If you want to join a credit union, you have to determine whether you want it to be a federal or non-federal (or state-chartered) one. All federal credit unions are insured by the National Credit Union Share Insurance Fund, which was created in 1970 to protect the deposits made by members. Nowadays, the National Credit Union Administration (NCUA) oversees this fund and it covers deposits of up to $250,000 for each individual member.

State-chartered credit unions are the second type of credit union available. In this case, the deposits made here might not be covered by the NCUA. Instead, they are usually covered by private insurers. So the funds are still protected, but not by the federal government. 

You can search for credit unions using this tool that will allow you to see your available local options.

Whether you decide to join a federal or non-federal credit union, keep in mind that you need to fulfill certain requirements first. Some credit unions are only available to current or former members of the U.S. Military and their relatives, some others are available for workers of a certain industry. Keep these restrictions in mind while doing your research.
 

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