Credit union.
In plain English
A credit union is a not-for-profit financial institution owned by its members, the people who bank there. It accepts deposits, makes loans, and offers checking, savings, and other services much like a bank. Because it returns surplus income to members rather than to outside shareholders, a credit union often charges lower fees and offers higher savings rates and lower loan rates. You generally must be eligible to join, based on where you live, work, or other shared ties.
01Why it matters
For everyday banking, a credit union can be cheaper than a traditional bank: fewer fees, lower loan rates, and higher yields on savings. Deposits are federally insured up to $250,000 by the National Credit Union Share Insurance Fund, the credit union version of FDIC coverage, so your money is protected the same way.
02The math, step by step
Say a bank charges $12 a month for checking unless you keep a high balance, while a local credit union offers free checking with no minimum. Over a year that is $144 saved. On a $20,000 car loan, a credit union rate even half a percentage point lower saves roughly $300 in interest over five years.
03What this is NOT
Both hold your money and lend it out, and both can be federally insured. The difference is ownership: a bank answers to shareholders seeking profit, while a credit union is owned by its members and returns surplus to them. That ownership structure is why credit union fees and rates often look friendlier.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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