Best Credit Unions: A Definitive Guide To Credit Unions

What is a credit union?

Traditional banking services are provided through a credit union, which is a sort of financial cooperative. Credit unions can be founded by major firms, organizations, and other entities for their employees and members and range in size from small, volunteer-only operations to large enterprises with thousands of participants across the country. Credit unions are owned, operated, and developed by their members. As a result, they are tax-exempt, not-for-profit organizations.

To know more about the best credit unions, let’s delve a little deeper and learn more about it.

Understanding a credit union

Credit unions operate on a simple economic model: members pool their money (technically, they buy shares in the cooperative) to provide loans, demand deposit accounts, and other financial products and services to one another. Any revenue earned is utilized to fund programmes and services that serve the community and its members’ interests.

Requirements for membership

Originally, credit union membership was restricted to those who shared a “common connection,” such as working in the same industry or for the same firm, or living in the same neighborhood. Credit unions have recently relaxed their membership requirements, allowing the general public to join.

To do business with a credit union, you must first become a member by opening an account (often for a nominal amount). You become a member and a partial owner as soon as you do. That implies you have a say in the union’s operations; you can vote on the board of directors and other union-related matters. The amount of money in a member’s account has no bearing on their voting power; each member has an equal number of votes.

According to the National Credit Union Administration (NCUA), membership in federally insured credit unions grew to 122.3 million as of June 30, 2020.

Advantages of credit unions

Credit unions, like banks, begin their financial operations by attracting deposits. Credit unions have two unique advantages over banks in this area, both of which stem from their nonprofit status:

• Credit unions do not have to pay corporate income tax on their earnings.
• Credit unions just need to make enough money to cover their day-to-day expenses. As a result, they have lower operating margins than banks, which are required to grow earnings every quarter by shareholders.

Credit unions can pay higher interest rates on deposits while simultaneously charging reduced fees for other services like checking accounts and ATM withdrawals because they can work with narrow margins. In other words, a credit union can help members save money on loans, accounts, and savings.

According to data from the Nationwide Credit Union Administration (NCUA), the national average rate for five-year certificates of deposit (CDs) offered by credit unions was 0.94 percent as of September 25, 2020, compared to 0.78 percent at banks.

Credit union money market rates were also higher, with an average rate of 0.17 percent compared to 0.12 percent at banks. While these differences may appear little, they add up to give credit unions a major advantage over banks when it comes to deposit competition.

Disadvantages of credit unions

Credit unions have fewer physical facilities than other banks, which might be a disadvantage for customers who want in-person assistance. The majority of them provide modern services like internet banking and auto-bill pay. Nonetheless, many credit unions’ small size can represent a trade-off in terms of service variety, technology, and accessibility.

Lower tech

Because smaller credit unions do not have the same technology budget as larger banks, their websites and security measures are frequently less advanced. Some mid-sized and larger credit unions, on the other hand, may offer mobile banking apps that compete with those of much larger for-profit organizations.

Fewer options

Because smaller credit unions do not have the same technology budget as larger banks, their websites and security measures are frequently less advanced. Some mid-sized and larger credit unions, on the other hand, may offer mobile banking apps that compete with those of much larger for-profit organizations.

Less flexibility

With additional resources to devote to customer care and people, banks are staying open later and longer, frequently until 5 p.m. or 6 p.m. on weekdays and Saturdays. Credit unions follow standard banker hours (9 a.m. to 3 p.m., Monday through Friday) however, larger ones, like SECU, provide a 24-hour customer care hotline.

Credit unions vs. banks

Larger banks are more likely to provide poor customer service. Wells Fargo was fined $575 million in 2018 for establishing unauthorized accounts and billing customers for extra vehicle insurance and mortgage costs, among other things. While this particular bank was a bad actor, many large banks are rigid in their customer service because standards are not imposed locally. Rather, national boards of directors and executive leadership implement them.

Credit unions are more flexible when it comes to client demands because they are focused on serving their members. Account owners—members of the credit union—have equal voting rights and can influence votes on customer service concerns.

Credit union membership is also smaller and more well-known among local branches, making it easier to form relationships with branch managers and loan decision-makers. It may be easier to obtain the loan you require as a result of this. Of course, some banks make it a point to reach out to their customers, so you can get good personal service at a local bank location.

Major banks usually have more locations where consumers can get direct service. Credit unions are more likely to be found in smaller towns and cities with fewer branches. To compensate for this disadvantage, credit unions have developed the CO-OP Shared Branch network, which now has over 5,600 locations across the country.

Connexus, for example, allows you to conduct an online branch search. Furthermore, it provides more than 54,000 surcharge-free ATMs countrywide through the CO-OP or MoneyPass to give more competitive client service.

Insurance on credit union accounts

Credit unions are not covered by the Federal Deposit Insurance Corporation (FDIC). The NCUA, which was founded in 1934, governs federally chartered credit unions as well as the majority of state-chartered credit unions.

The Credit Union Locator can tell you if a credit union is federally chartered and provide you with other details. The National Credit Union Share Insurance Fund (NCUSIF), which uses government funds to back up shares (deposits) in all federal credit unions, is one of the NCUA’s key functions.

The NCUA provides up to $250,000 in coverage for each individual account, joint account, trust account, retirement account (such as traditional IRAs, Roth IRAs, or Keogh plan accounts), and business accounts. For example, if you have a credit union and have an individual account, a Roth IRA, and a business account, your total shares are insured up to $750,000.

Best credit unions

From a functional standpoint, there isn’t much difference between a credit union and a bank: both provide personal and business customers with a variety of deposit accounts, loans, and credit accounts. Credit unions, on the other hand, are owned by their members rather than shareholders and are run as non-profit organizations.

As a result, credit unions frequently offer more competitive rates than banks while offering a similar range of products and accounts. As a result, they are an excellent choice for your banking needs.

We identified which credit unions are open to customers nationwide and then compared interest rates, account types and features, in-branch banking, and ease of membership to narrow the list down to our top picks in six categories.

The best credit unions for 2022

• Best Overall: Blue Federal Credit Union
• Best for Checking: Evansville Teachers Federal Credit Union
• Best for a Savings Account: Alliant Credit Union
• Best for CDs: Hiway Credit Union
• Best for Military Individuals & Families: Service Credit Union
• Best If You Have Kids: First Tech Federal Credit Union

Best overall

Blue federal credit union

• Blue Federal Credit Union’s banking menu includes virtually every type of account or loan you’ll require, all while paying well above-average rates, charging zero or minimal fees, and being extremely simple to join. When you factor in in-person banking at thousands of credit union branches across the country, it’s easy to see why it’s our best overall credit union.

Pros

• A one-stop shop for the majority of consumers’ banking needs
• Three checking account options are available, including free and high-yield accounts.
• Savings and CD rates that are three to six times higher than the national average
• The ability to bank in-branch at 5,000 credit union locations across the country.

Cons

• Other credit unions and online banks provide higher savings and CD rates.
• Some networks have a larger ATM footprint than others.

Blue Federal Credit Union provides a full menu of services, including checking, savings, money market, and CD accounts, as well as health savings, IRA, and business accounts; multiple credit cards; and almost any type of loan you could want, including mortgages and vehicle loans, as well as student, personal, and business loans. With all of that, as well as great rates and in-person access, it earns our award for best all-around credit union.

For the majority of accounts, fees are minimal or non-existent. Furthermore, your savings or CD earnings can be multiplied by two to six times the national average. Meanwhile, its high-yield checking account is one of the easiest to qualify for, requiring only 10 debit transactions per month rather than the more typical 12 to 15.

Blue is a member of the Co-Op Shared Branch network of credit unions, which allows you to conduct many banking transactions at approximately 5,000 credit union locations across the United States, as well as use approximately 30,000 nationwide ATMs.

Blue Federal Credit Union’s geographic focus is on Wyoming and Colorado, but anyone who does not meet the credit union’s standard eligibility requirements can join by donating $5 to the affiliated Blue Foundation and keeping a minimum of $5 in savings.

Best for checking

Evansville teachers federal credit union

Teachers in Evansville Everyone is welcome at Federal Credit Union. And, with a wide range of checking accounts available, including one of the best high-yield options available, they earn our award for best credit union for opening a checking account.

Pros

• Checking account with a high yield and a top rate on balances up to $20,000
• Instead of a high APY free ATM withdrawal, you can earn rewards points.

Cons

• Although CD rates are high, there are no high-yield savings accounts available.
• Free checks are only available to those under the age of 23 or over the age of 55.
• There are no accounts for minors or teenagers.

Evansville Teachers Federal Credit Union (ETFCU) offers all types of checking accounts, including a free basic checking account, a debit card, and a money market account that pays two to four times the national average. They do, however, offer two accounts in which you can earn a fantastic rate or rewards if you use your debit card on a regular basis. We named them our best credit union for checking accounts because they have so many great options.

If you’re willing to use a debit card on a regular basis, you can earn much more than you might think with ETFCU’s Vertical Checking account. This high-yield account currently pays a staggering 3.30 percent APY on balances of up to $20,000 per month if the requirements are met.

Simply make at least 15 debit card purchases, have a direct deposit of any amount hit your account, login at least once via online or mobile banking, and sign up for paperless statements to earn this impressive rate in any given month.

With the same monthly qualifications, you can choose Platinum Rewards Checking, which pays one point for every dollar spent on an ETFCU credit card or two points for every dollar spent on an ETFCU debit card. Points can be redeemed for merchandise, gift cards, or travel.

Joining ETFCU is simple and entitles you to all of the credit union’s banking and loan services. Simply donate $5 to their affiliated nonprofit, the Mater Dei Friends & Alumni Association, and you will receive $5 in your member savings account.

Best for a savings account

Alliant credit union

Alliant is an online credit union, and because it lacks branches, it can offer higher interest rates than most other institutions, earning it our top spot for the best credit union for a savings account.

Pros

• Earn nine times the national average savings account rate.
• Rates on checking accounts and CDs are competitive.
• Access to 80,000 free ATMs, as well as monthly refunds of up to $20 on out-of-network ATMs
• There is a youth savings account and a teen checking account available.

Cons

• There are no physical branches, and the company is not a member of a shared branch network.
• There are no health savings accounts (HSAs)
• There are no business accounts.

Alliant Credit Union is an excellent choice if a high-yield savings account is one of your banking priorities. Alliant, as an online-only institution based in the Chicago area, does not have to spend money on maintaining physical branches, allowing it to pay higher interest rates. As a result, it has been named our best credit union for savings accounts.

Its High-Rate Savings account currently pays more than nine times the FDIC’s national average savings account rate of 0.06 percent, and there are no fees if you sign up for paperless statements with no minimum or maximum balance.

They also provide a high-rate checking account, teen checking, and competitively priced certificates of deposit (CDs), making them a viable option for handling the majority of your everyday banking needs.

What Alliant does not offer is in-person banking because there are no Alliant branches and they do not participate in the credit union shared network. However, you have access to a very broad and deep network of ATMs, with 80,000 of them fee-free across the country and up to $20 reimbursed to you per month for any out-of-network ATM fees.

Joining Alliant is not only simple, but also free. Despite the fact that they require you to join their affiliated nonprofit Foster Care to Success, they will cover the $5 membership fee for you.

Best for CDs

Hiway credit union

Hiway Credit Union is a full-service credit union that offers nearly every type of bank account, credit card, or loan, but where it really shines is in its stellar rates on certificates of deposit, which place it at the top of our list of the best credit unions for CDs.

Pros

• Pay CD rates that are consistently among the best in the country across all major CD terms.
• There is also a high-yield checking account available.
• Almost every consumer or business banking or borrowing need can be met in a single location.
• Over 64,000 free ATMs and 5,000 shared branches are available nationwide.

Cons

• Earning the highest CD rates necessitates a minimum of $25,000 per certificate.
• Savings account rates are barely above the national average.
• No teen checking account, and the youth savings account pays a lackluster rate.

While many institutions offer moderately competitive rates in most certificate terms and may offer a standout rate as a promotion on one term, Highways rates are among the best in the country for all terms, making them our pick for the best credit union for CD shoppers.

Hiway’s one-year CD rate is four to five times the FDIC’s national average rate of 0.13 percent APY. You can also earn three to four times the national average of 0.28 percent APY for a five-year certificate. Those with small savings can open a CD with as little as $500, but you can earn more by depositing a larger balance, with additional rate tiers of $10,000 and $25,000 per certificate.

A visit to Highway’s website will quickly impress you, not only with a user-friendly design but also with a comprehensive list of bank account options. HSAs, Coverdell Education Savings accounts, Youth Savings, as well as IRAs, credit cards, all major consumer loans (other than student loans), and business offerings are examples of these. You can also conduct in-person transactions at 5,000 credit union offices nationwide as a member of the Co-Op Shared Branch network.

If you do not live or work in Minnesota, or if you are not eligible through your employer, you can join Hiway by making a $10 donation to either the Hiway Credit Union Foundation or the Minnesota Rec & Parks Foundation, plus a $5 deposit into a member savings account.

Best for military individuals & families

Service credit union

It’s our pick for the best military credit union, offers great rates, even better bonus rates for deployed individuals, and few fees with low minimums for active military members and veterans, as well as their family members.

Pros

• Exceptional savings rates accounts
• A free no-minimum checking account that pays interest
• Low minimum deposits on CDs with competitive rates
• Access to over 85,000 free ATMs and 5,000+ shared branches nationwide

Cons

• No high-yield checking option
• For larger savings account balances, online banks pay more
• Though its CDs are competitive, higher rates can be had elsewhere

Service Credit Union caters to active-duty military, veterans, and their families. As a result, the credit union now offers a full menu and pays some of the best rates available, ranking first among credit unions for military-affiliated individuals and families.

You can earn many times the national average on savings accounts at service. Any balance less than $500 earns a higher APY than the highest-paying nationwide savings account, which currently pays 5.00 percent APY.

However, there are numerous other reasons to join Service. Its checking account is free, there is no minimum balance requirement, and it pays interest. And its CDs have a low minimum deposit of $500 and competitive interest rates. It also has a holiday  savings account with an unbeatable interest rate.

The Deployed Warrior Savings account, which is open to those currently serving active duty in a combat zone, is one of Service’s most unique offerings. For those who qualify, the account offers a whopping ten percent annual percentage yield (APY) on balances up to $10,000.

Anyone who is active duty military, a veteran, or a current or former employee of the Department of Defense or other select employers is eligible to join Service Credit Union. Those directly related to a military member are also eligible, including siblings, parents, grandparents, and grandchildren, in addition to immediate household members. Non-military individuals can also become eligible by joining the American Consumer Council for an $8 annual membership.

Best if you have kids

First tech federal credit union

Easy-to-join First Tech Federal Credit Union scores our highest marks for an ultra-high-paying account that’s great for your kids.

Pros

• Pay one of the highest national rates on minor savings accounts while also providing fee-free youth checking.
• Parents can choose from high-yield checking, high-paying HSA, and low-interest credit cards.
• There are no membership fees or donations required to become a member.
• Access to free ATMs and 6,500 shared branches across the country

Cons

• Savings account rates are low, and CD rates are also low.
• There are no free checks with either adult checking account.

A youth bank account can be a great way to instill good financial habits in children at a young age, and First Tech is our top pick for credit unions that are great for kids. First Tech’s Start-Up Savings account offers a fantastic 5% APY on all balances up to $1,000, with a $5 minimum balance requirement.

A Start-Up Checking account is also available from First Tech. This account also has no fees and is open to children of any age up to the age of 18. Your child can have a debit card with parental permission. There is also no minimum balance requirement for the checking account.

Of course, California-based First Tech has a lot to offer parents as well, with a wide range of accounts, credit cards, and loans to choose from. The fact that you can join First Tech for free without even making a donation, makes it especially appealing. All that is required is that each member maintain a $5 balance in their member savings account.

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Is your money safe in a credit union?

Yes, a credit union can be just as safe as a bank for your hard-earned money. That’s because, like banks, the vast majority of credit unions are federally insured, with up to $250,000 in deposits per individual per institution protected. As a result, if your credit union fails, all of your deposits up to this amount are safe.

The Federal Deposit Insurance Corporation, or FDIC, provides government backing for banks, while the National Credit Union Administration, or NCUA, protects credit unions.

What is the downside of a credit union?

The drawbacks to banking with a credit union are minor. Though there are some very small credit unions that may not have as robust an online or mobile customer interface as larger institutions, this is true when comparing large versus small banks.

Similarly, some credit unions may not provide all of the services you require. But, once again, you can find this across a wide range of banks. The key is to select a credit union that offers a diverse range of products, particularly those that are important to you.

Credit unions frequently pay higher interest rates and have lower loan rates than most banks.However, this is not always the case. High-yield savings accounts are one area where online banks tend to outperform physical banks and credit unions.

Can I be a member of more than one credit union?

You can join as many credit unions as you want, and almost every credit union has the policy of “once a member, always a member.” So, even if you no longer bank with a particular credit union, you may find that credit union useful in the future, and you will remain a member if you return for new business.

Joining multiple credit unions is a common strategy used by those who want to maximize the interest rates they earn on each account type. For example, retirees who have a significant amount invested in CDs can benefit from holding certificates with varying term lengths at different banks or credit unions.

Why should you choose credit unions?

Until recently, most people associated banks with dependability, longevity, and stability in the financial world. With the financial markets shaky and many financial institutions failing, many of us are beginning to wonder if banks are the best way to store, transfer, and save our money.

If you’re thinking about switching from a bank to a credit union, there are several reasons to do so.

1. Friendliness and accessibility

Big banks, especially those with brick-and-mortar locations, can appear cold, formal, and even unapproachable. It frequently appears that branch managers lack the authority to make decisions to assist you, or that the bank is so large that it doesn’t care about having your business. Credit unions can have a friendlier atmosphere and tone, and they can simply be more accessible on all levels.

2. A co-op, not corporation

Credit unions are frequently referred to as “financial cooperatives” rather than financial institutions. According to the Seattle Metropolitan Credit Union, the goal is not to make more money from customers, but to “address a common need through a jointly-owned and democratically-controlled enterprise.”

3. Nothing to lose

Most credit unions’ only standard requirement for membership is that you live in the area. Credit unions provide the same services as banks, such as checking accounts, savings loans, and investment opportunities.

4. It’s a democracy

The fact that credit unions are member-owned and member-run is perhaps their most distinguishing feature. Credit unions are free to make decisions that benefit their members rather than stockholders, who may have interests that differ from those of the members.

5. Better rates

The ability to make money with your own money is a huge step in the right direction, but it’s often out of reach at a corporate bank unless you have a large dollar balance in your account. Credit unions are free to pass surplus money on to members in the form of fewer fees, more services, lower interest on loans, and higher dividends on deposits because profits to stockholders aren’t part of the company vision.

6. Beyond-banking perks and free education

Other services provided by credit unions include individual health insurance and financial advisory services. The majority of credit unions are concerned with community enrichment and financial education, with many providing free classes or other educational services to the community.

How did we choose the best credit unions?

There are over 5,000 credit unions in the United States, but the vast majority of them restrict their customer base to a specific community, state, or region, or to a specific employee group. However, there are a few hundred of them that allow you to join regardless of where you live or work. We began our investigation with these.

From there, we dug into which of those credit unions pays the best rates on savings and CDs, offers the best checking account options, offers the widest range of financial services to personal and business customers, and offers the simplest and cheapest paths to membership.

We also prioritized credit unions that participate in the Co-Op Shared Branch network, which allows customers to access local banking even if they do not live in the credit union’s service area.

With this information in hand, we were able to sort the best credit unions into the award categories listed above.

Conclusion

Whatever your banking needs are—whether it’s an all-around great credit union or one that outperforms the competition for a specific type of account—our list of winning credit unions will guide you to a solid choice that’s likely to earn you more than you were previously earning, all while knowing you’re supporting a credit union’s nonprofit mission in its geographical or employer community. Blue Federal Credit Union is hard to beat if you’re looking to consolidate all of your banking and expect to use a variety of products. Their extensive menu of accounts, credit cards, and loans is complemented by rates that outperform the majority of financial institutions, as well as no or low fees and a simple, easy membership process.