In the United States, a federal credit union is a cooperative, non-profit institution whose members pool their resources to provide affordable credit. Federal credit unions are exempt from state and federal income taxes, which set them apart from banks. U.S. President Franklin D. Roosevelt established the Federal Credit Union Act in 1934.
The National Credit Union Administration (NCUA) supervises each credit union in the U.S. The NCUA is responsible for chartering new credit unions, insuring deposits and establishing credit union policy. The main purpose of the NCUA is to make sure that each credit union is operating efficiently and safely. The NCUA also protect members and their deposits.
In order to become a member of a federal credit union, an individual must meet the requirements set forth by the particular credit union. Some requirements might include being an employee of a certain company, holding a government job or having children enrolled at a local school. Each federal credit union can set unique requirements for membership. Usually, a member's immediate family members are also eligible to sign up for the credit union.
The application process typically includes filling out an application and proving affiliation with a certain group. The individual also needs to deposit a sum of money into the checking or savings account to get it started. The member will receive a checkbook and debit card, just like at a regular bank. He or she can even apply for a credit card through the federal credit union.
Becoming a member allows a person to participate in credit union elections and help make decisions regarding the institution. Credit unions typically are much smaller than regular banks, most of which have multiple branches across several states. Credit unions are often local and cater to the needs of the city in which they are located. They might offer things such as low-cost, used cars and credit union-owned homes.
The advantages of becoming a member of a credit union are that members receive lower rates than at local banks and more personalized attention. Credit unions even offer mortgages to their members at lower interest rates. Members can participate in local charity events and raffles through a credit union.
Bank deposits are insured by the Federal Deposit Insurance Corporation (FDIC), a credit union member's money is safe in a federal credit union for up to $100,000 US Dollars, just like at a bank. The money is backed by the U.S. government. Credit unions are often safer than regular banks because other credit unions will buy up failing branches rather than closing them.