By Erin Lowry
Credit Unions are the underdog of financial institutions. With over 100 million members and $1.1 trillion in assets, credit unions are growing but still pale in comparison to the trillions of dollars in assets held by the big banks.
But sometimes, the underdog is the better option, which is often true in the case of credit unions. Credit unions often offer lower fees, lower interest rates, better customer service and are accountable to their members compared to deep-pocket stockholders.
Credit unions also differ from banks in their eligibility requirements. Laws created by the Federal Credit Union Act of 1934 dictate credit unions must have defined memberships. For example, members must have a common bond such as the same place of worship, employer, geographic location or relationship to an existing member.
Credit Unions Aren't Exclusive Clubs
These eligibility requirements may feel exclusive, but shouldn't deter potential customers from applying for membership. In fact, there are at least 60 credit unions anyone can join, including ones that sound exclusive to the military or government employees, like Pentagon Federal Credit Union.
People interested in a joining a credit union should first see if a community-based credit union fits their needs. It's often easy to be eligible for membership by simply living, working or worshipping within the credit union's boundaries.
Consumers who don't qualify for credit union membership based on employer affiliation, location or any other requirements can seek eligibility by joining an organization with membership benefits or, in some cases, simply depositing money into an account.
Even bank customers should consider membership with a credit union to diversify options for mortgages, balance transfers, car loans or a personal line of credit.
Credit Unions Aren't Nonprofits
It is important to keep in mind that credit unions aren't nonprofit organizations. Many still charge fees like overdraft charges at prices close to a bank's. However, credit union members have more control by being voters with a voice instead of one among millions of customers. Credit unions may also offer more competitive rates on a loan or personal line of credit than a big bank.
Many credit unions make it relatively simple and cost-effective to become a member. Some consumers may blanch at the idea of spending $15 or $50 to become a member, since a bank membership can be free if you manage to never need a loan or be charged a fee. But the money invested in a membership might save you money in the long term by not having to pay bank fees. Here's a sample of credit unions anyone can join:
American Heritage Federal Credit Union
Eligibility: Join by depositing $15 into a share savings account and maintaining this minimum balance.
Product worth joining for: Consumers dealing with credit card debt can get a 24-month, no-fee balance transfer with a 2.99 percent APR promotional rate.
Digital Federal Credit Union
Eligibility: To become a DCU member, you much first join one of the listed organizations that includes nonprofits like the Free Software Foundation. The organizations range in membership fees from $10 to $120. However, joining DCU results in a lifelong membership, so you could cancel a membership with the organization after joining.
Product worth joining for: Those building credit could join for the Visa (V) Platinum Secured Credit Card, which comes with a hefty minimum deposit of $500, but doesn't have an annual fee.
Pentagon Federal Credit Union
Eligibility: Members of the National Military Family Association and Voices for America's Troops are eligible for PenFed membership. PenFed makes it easy for anyone to join one of these associations, and subsequently join PenFed. Just pay dues to Voices for America's Troops for $14 a year or the National Military Family Association's one-time $15 fee.
Product worth joining for: PenFed Platinum Cash Rewards Visa Card offers unlimited 5 percent cash back on gas purchases. There is no fee for this card in year one and a $25 annual fee in subsequent years. Another product worth considering is the 30-year-fixed mortgage at 3.6 percent APR.
Fort Knox Federal Credit Union
Eligibility: It may seem like a small credit union, but anyone can join. All consumers are eligible for membership by just paying $5 to join the American Consumer Council or the $15 membership fee.
Product worth joining for: Fort Knox offers a Visa Platinum credit card with unlimited 5 percent cash back on gas purchases. It's a hard deal to beat for drivers who want to maximize cash back at the pump.