If you are looking into switching to a credit union, then you will need to understand what you will find in the credit union landscape. First and foremost, credit unions can be divided into two different camps, those that federally chartered and those that are state chartered. How are they different you might ask? Well here is a quick breakdown of their differences to help you understand more thoroughly what kind of credit union you are looking to do business with.
State chartered credit unions
A state-charted credit union differs from a federal credit union in several ways. For one, this type of credit union falls under the regulatory jurisdiction of their state’s division of financial services. Some advantages that state-chartered credit unions have greater flexibility on interest rates. They may have a higher maximum ceiling or might not have any interest rate charges. Moreover, typically state regulatory authorities “often have a much greater level of familiarity with their local credit unions than the NCUA enjoys with federally chartered credit unions,” according to Investopedia.
However, it is important to keep in mind that not all states have state-chartered credit unions. Examples of this include Delaware, South Dakota, and Wyoming, whose credit unions must be federally chartered. And lastly, some state-chartered credit unions “carry deposit insurance that is backed by the full faith and credit of the U.S. government.”
Federally chartered credit unions
As mentioned already, state-chartered credit unions fall underneath the jurisdiction of their state’s division of financial services—not federal student unions of course. Federally chartered credit unions are regulated by the NCUA, and are insured by the National Credit Union Share Insurance Fund—they are not operated by the federal government.
Federally chartered credit unions typically have maximum interest rate regulations. Besides this major difference, and whose jurisdiction they fall under from a regulatory perspective, there isn’t much more that separates a state-chartered credit union from a federally chartered credit union. Greater differences can be found between credit unions in general and banks.
If you are thinking about switching to a credit union, you should make sure you what sort of partnerships the credit unions have to ensure you have ATM access. Often times, when people hear “credit union,” they think that it will be difficult to find an ATM to use. But that is not always the case.
Furthermore, because credit unions are small, they have an easier time implementing new banking technologies in comparison to larger banks. This allows for an improved customer experience, making banking easier and more intuitive.
Changing from one banking institutions to another, whether it be a major bank or a credit union, can be a stressful process. To learn how to streamline this process, you can read our article entitled “Switching Banks in 4 Easy Steps.” It will give you useful tips to help you avoid the common roadblocks and errors that happen when trying to make the jump from one bank to another.