What Is a Credit Union?

Credit unions are financial institutions — but unlike banks, they are owned by the people who use them. That difference in structure shapes everything from how they set interest rates to how they're regulated.

The cooperative model

A credit union is a member-owned, not-for-profit cooperative. When you open an account at a credit union, you become a part-owner. Surplus earnings go back to members as higher savings rates, lower loan rates, and reduced fees — not to outside shareholders.

This cooperative structure dates to 19th-century Germany, where workers formed lending circles to help each other access credit outside of exploitative moneylenders. The first US credit union opened in 1909 in Manchester, New Hampshire. Today there are more than 4,700 federally insured credit unions serving over 140 million members.

Field of membership

You can't join any credit union — you must qualify through its field of membership. Common eligibility criteria include:

• Employer: You work for a specific company or industry
• Community: You live, work, worship, or attend school in a defined geographic area
• Association: You belong to a qualifying group (union, alumni association, professional organization)
• Family: An immediate family member already belongs

Community credit unions — those open to anyone who lives or works in a county or metro area — have become increasingly common. If you're not sure whether you qualify, the credit union's website will list eligibility, or you can call and ask.

How credit unions are insured

Federal credit unions and most state-chartered credit unions are insured by the National Credit Union Administration (NCUA) through the National Credit Union Share Insurance Fund (NCUSIF). Deposits (called "shares") are insured up to $250,000 per member per account category — the same limit as FDIC insurance at banks.

A small number of state-chartered credit unions carry private insurance instead of NCUA coverage. When comparing institutions, it's worth confirming the insurance status.

Regulation and oversight

Federal credit unions are chartered and regulated by NCUA. State-chartered credit unions are regulated by their state agency, with NCUA providing backup oversight for those with federal insurance.

One key difference from banks: credit unions are exempt from the Community Reinvestment Act (CRA). The CRA requires FDIC-insured banks to demonstrate they lend and invest in low- and moderate-income communities. Credit unions face different community service expectations, partly because their field-of-membership requirements already restrict them to defined communities.

What credit unions offer

Most credit unions offer the same core products as banks: checking and savings accounts, auto loans, mortgages, credit cards, and personal loans. Larger credit unions may offer investment services, business accounts, and wealth management.

Because they don't answer to outside shareholders, credit unions historically offer:

• Higher interest rates on savings accounts and CDs
• Lower rates on auto and personal loans
• Fewer and lower fees on checking accounts
• More flexibility on loan approvals for members with thin credit files

The trade-offs

Credit unions have real advantages, but also genuine limitations. They tend to have fewer branch locations than national banks. Their digital banking tools vary widely — some large credit unions have excellent apps; many smaller ones lag behind the big banks. ATM networks are often shared (through networks like CO-OP and Allpoint), which helps offset the branch gap.

How to find a credit union

You can browse all 4,300+ federally insured US credit unions on Bank Scorer, filtering by state, Low Income designation (LICU), and asset size. Each profile shows membership type, total assets, net worth ratio, and branch locations.