Credit Union Myths

Millions of people have joined credit unions, and they’re glad they did. Still, the popular myths about credit unions can confuse people and obscure the truth about their mission. Let’s set the record straight here.

• Myth: Credit unions pay no taxes.
• Myth: Credit unions are really just like banks.
• Myth: You can’t belong to a credit union unless you work for the right employer (or you belong to a union).
• Myth: Credit unions’ tax-exempt status gives them an unfair advantage over banks.
• Myth: Credit unions should be as strictly regulated as banks.
• Myth: You have to pay a membership fee to join a credit union

Myth: Credit unions pay no taxes.

Fact: Credit unions do pay taxes, including property, local and employer taxes. However, because credit unions are not-for-profit—returning all profits to members (customers) in great rates and low fees—they’re exempt from federal income tax.

Myth: Credit unions are really just like banks.

Fact: Credit unions do provide many services that banks offer. But the core values are so different—regardless of the credit union’s size or offerings. As a credit union member, you’re not just a customer; you’re an owner, with a vote in determining the direction of the credit union. And because credit unions are not-for-profit, all earnings go back to the members in the form of great rates and low fees. It’s about putting people before money. Banks, on the other hand, exist to make a profit for shareholders. While that is fine, it means they’re not motivated by the same values as credit unions.

Myth: You can’t belong to a credit union unless you work for the right employer (or you belong to a union).

Fact: This used to be true, but it’s not anymore. Here’s how it works: a credit union’s charter defines its field of membership—the “common bond” that all people must share to be eligible to join. Today, you may be eligible within a credit union’s field of membership, based on where you live, work, worship or attend school.

That’s good news, because with hundreds of credit unions across New York State, almost anyone can find a credit union to join. Our CU Locator can help you find credit unions for which you might be eligible.

Myth: Credit unions’ tax-exempt status gives them an unfair advantage over banks.

Fact: Actually, there’s no evidence to support this claim. Quite the contrary:

• Even as credit unions grow, banks have enjoyed record profits.
• Ten years ago, credit unions held 2.0% of America’s financial assets. Today they hold 2.1%.
• The typical credit union has $4 million in assets. The average bank holds $250 million.

Myth: Credit unions should be as strictly regulated as banks.

Fact: They are. Credit unions must comply with most of the same regulations that banks do. In fact, to ensure safety and financial soundness, credit unions face more restrictions than banks in the investments and loans they can make.

Myth: You have to pay a membership fee to join a credit union.

Fact: There’s no membership fee involved. While credit unions do ask you to keep a minimum amount on deposit, that amount is very small—usually $5 to $25—and you will receive it back if you close your credit union account.