Here's the Difference Between a Federal and Non-Federal Credit Union


You likely already know that credit unions are a bit different from banks, mostly in the way these financial institutions are owned and operated. But as you research your local credit unions, you'll see that some are listed as federal credit unions and others are not.

Is there a difference? Does it matter whether you join a federal credit union or one chartered by the state in which it resides? It all depends on how important it is for you to have the money you deposit with a credit union insured by the U.S. government, instead of a private insurer.

Making the switch to credit unions

Both types of credit unions, federal and state-chartered, are not-for-profit organizations owned by its members. If you take out a loan or credit card, or open a savings or checking account with that credit union, this includes you. Because credit unions are not-for-profits, the earnings that they make are paid back to their members as higher savings rates and lower interest rates on loans and credit cards. (See also: Credit Unions vs. Banks: What's the Difference?)

Federal vs. state-chartered

Once you decide that you want to join a credit union, you'll have to determine if you want to become the member of a federal credit union, a state-chartered one, or whether it matters to you at all.

The National Credit Union Share Insurance Fund, a federal insurance fund backed by the U.S. government, insures all federal credit unions. Congress created this fund in 1970 to protect the deposits members make at credit unions. Today, an independent agency, the National Credit Union Administration, oversees this fund.

The fund operates much like the Federal Deposit Insurance Corporation, which insures the deposits made at traditional banks. The National Credit Union Share Insurance Fund covers deposits of up to $250,000 for each individual member of a credit union.

The other type of credit union is state-chartered. The deposits members make here may not be covered by the federal insurance fund. Instead, these deposits are often insured by private insurers. These funds are still protected. They're just not protected by the federal government.

If that matters to you, you can search's Find a Credit Union tool, which will find credit unions near you that are insured by the federal fund. Credit unions that are insured by the National Credit Union Share Insurance Fund must display the official National Credit Union Administration sign in their lobbies. Federal credit unions usually include the word "federal" in their name, too.

There is no better type of credit union. Both federal and state-chartered offer a range of banking services, credit cards, and loans. The big difference comes down to how these institutions are insured.


Whether you decide to join a state-chartered or federal credit union, be aware that there are sometimes requirements for membership that you might not be able to meet.

Some credit unions are only open to current or former members of the U.S. Military and their relatives. Others are only available to those working in a specific profession, such as teachers or nurses. Others only serve a specific geographic boundary, and its members must live in those boundaries. As you research credit unions, keep these restrictions in mind.

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