One of the downsides of credit unions is the fees that you may have to pay when using ATMs around town.


Credit Unions

While your experience at a credit union may be nearly the same as at a bank, the structure and reasoning behind the scenes couldn't be more different. Some of the small details -- calling a checking account a "share draft" or customers "members" -- can be confusing, but the story with credit unions goes much deeper than that.

America's first credit union was founded in Manchester, N.H., in 1908. In that year, Congress passed the Federal Credit Union Act to help create credit unions all over the U.S. All credit unions' membership is restricted to a certain group -- members of an industry, a region or other category -- but the wide array and variety of them makes it easy to find a credit union to join.

Credit unions are different from banks; when you deposit your money, you're actually buying shares of the company. Rather than being a customer, you're part owner: That's why your account is called a "share." There's no board of directors or corporate interest controlling the credit union's choices because members agree upon everything. Even the executives and directors are volunteers, elected by vote.

Credit unions aren't run for profit, which means a lot of the concerns and scary decisions of larger banks never even come up. Of course, "not for profit" isn't the same as a "nonprofit" organization since credit unions don't rely on donations. Any profits are what allow credit unions to offer better rates on loans and savings, typically lower fees and other advantages. At the end of the year, any revenues beyond this are distributed to the membership through dividends.

Of course, all that good news comes with a few drawbacks. Because of the small, local nature of the credit union and its concentration on your community, it can be hard to get your money without visiting a branch. Traveling and even using ATMs around town can mean major fees. Depending on the credit union, new trends and services -- like online banking and bill pay, or even debit cards -- may become available much more slowly.

Still, if you like the idea of being a part of a cooperative effort, and the above inconveniences don't apply to your lifestyle, joining a credit union can pay off. Not just in customer service and better financial rates, but in the community around you.