What Is a Federal Credit Union?

A federal credit union (FCU) is a credit union regulated and supervised by the National Credit Union Association (NCUA). The NCUA is a federal government agency with authority designated by the Federal Credit Union Act of 1934 to oversee the national credit union system in the United States. The NCUA provides chartering for U.S. credit unions similar to the chartering process by the Office of the Comptroller of the Currency for national banks.

Federal Credit Unions Explained

Federal credit unions must be chartered by the NCUA to become operational in the United States. A wide range of federal credit unions exists with varying membership requirements. Federal credit unions offer comparable services to national and state-chartered banks. However, federal credit unions are co-operatives which are also known as mutual companies.

Mutual Company Structure

Federal credit unions are one of the leading categories of mutual companies in the United States. Many insurance companies were structured as mutual companies however a demutualization movement in the 1990s caused a migration from this structure.

Mutual companies are private, co-operative companies that are owned by their members. Membership eligibility is usually based on distinct member affiliations such as teachers unions, fireman unions, federal employee unions and more. Many credit unions have broader eligibility requirements that can include individuals from a location or other broad ranging characteristics.

As a co-operative, mutual company members of credit unions own shares. Shares are distributed based on deposits. Therefore, the typical minimum value a borrower must have to open a deposit account is equal to a share in the company. Members must maintain a base level of deposits concurrent with shareholding requirements.

Making credit unions even more attractive is the fact that deposits can be protected by the U.S. Treasury similar to FDIC insurance. In order to obtain FDIC insurance credit unions must be either federally chartered or a state-chartered credit union that has opted to participate in the National Credit Union Share Insurance Fund (NCUSIF).

Products Offered

Credit unions offer the same types of products as traditional banks. Often credit unions will have more customized product offerings based on the interests of their members.

Standard products include checking accounts, savings accounts, money market accounts and loans. Since these organizations are essentially owned by the people who deposit money with them, credit union members often enjoy higher rates on their savings accounts and lower costs of borrowing than customers at traditional banks.

Credit unions also typically offer educational sessions for their members. Popular seminar topics often include information on home buying and personal finance.