Using this guide
What’s the diff?
There are different types of financial institutions out there, but the two types that you’re most likely to deal with are banks and credit unions.
You should care about belonging to a credit union for one important reason: credit unions give you a voice. You have a say in your financial institution because you are an owner. One day, you’ll need to invest your money, buy a car, buy a house or even start a business. Your credit union will be a terrific partner for you because as an owner, you’ll get the respect you deserve. This is why you’ll see credit unions referred to throughout this guide.
Banks vs. credit unions
- Not owned by bank customers
- For profit
- Profits not shared with bank customers
- Run by paid board of directors, not necessarily bank customers
- Customers have no say in how bank is run
- Owned by credit union members
- Not for profit
- After all costs are paid, excess earnings are distributed to credit union members
- Run by a volunteer board of directors who are elected by fellow credit union members
- Members can vote on how credit union is run
The difference illustrated in video form
Is my money safe?
Your money is safe at a credit union no matter what. The National Credit Union Administration (NCUA) is the independent federal agency that supervises and insures savings in federal and most state-level credit unions.
Learn the lingo
Communication is key in everything from term papers to texting, but you’ll be a lot more confident talking about your financial needs if you know some of the lingo. Here are some common financial terms for your reference. You can find a full list in the glossary.
- Account Think of this as the digital container that your credit union uses to hold your money. In reality, it’s the accounting of how your funds flow in and out of your credit union.
- Check A written authorization that lets another person or company withdraw money from your account.
- Checking account This is a transactional account, meaning that money flows in and out constantly. Paying bills, depositing checks or buying coffee are some common transactions. Because of this constant movement of funds, these accounts pay very little–if any–interest.
- Credit card A credit card is like an easy-access loan from your credit union. It typically has a maximum limit and a high interest rate. You should only use a credit card in cases of emergency.
- Debit card A debit card gives you access to the cash held by your credit union. The debit card has replaced the use of checks for most things, except personal payments between people.
- Debt An amount of money you owe to someone, even if it’s your mom (ESPECIALLY if it’s your mom!)
- Loan A sum of money you borrow from your credit union. The loan will have a preset monthly payment and rate of interest that you pay on top of the money you borrowed. Think of the interest as a fee for borrowing the money.
- Savings account An account meant to accumulate money towards a particular purchasing goal. It generally pays a modest amount of interest (also called dividends).
- Shares One share represents ownership in your credit union. When you join a credit union, the membership shares you buy stay in your share account.
Want to really impress your friends? Learn all the financial jargon in our complete glossary.