Credit unions offer a range of deposit accounts, loans, and other financial services — often with better interest rates and fewer fees than you’ll find at a bank. But unlike banks, credit unions require you to become a member before you can open an account.

Read on to learn the ins and outs of credit unions and the steps required to join one.

What is a credit union, and how does it work?

Credit unions are not-for-profit financial institutions that offer deposit accounts — such as checking, savings, money market, and share certificates — plus loans, mortgages, credit cards, and more. They often cater to both individuals and small businesses.

Unlike banks, credit unions have membership requirements. You have to be a member to use a credit union’s products and services, and you must meet a credit union’s eligibility requirements to become a member.

A credit union’s members are also its owners. When you join a credit union, you’ll typically make a small deposit into what’s known as a share account. A share account can be a checking or savings account and functions like a regular deposit account — but it also represents your financial share in the credit union.

With this cooperative model, credit unions focus on member well-being and may offer financial education and other community resources. Credit unions may also cater their products and services toward whatever community, geographic area, profession, or group their members belong to.

Because credit unions are member-owned and not-for-profit, they don’t seek to earn a profit for shareholders. Instead, a credit union’s profits return to its members. This often means lower fees, higher rates on savings accounts, and lower rates on loans for credit union customers.

Pros and cons of credit unions

There are obvious perks to credit unions, but there are downsides, too. Compare the pros and cons of credit unions before becoming a member and opening an account.

Pros:

• Better rates on loans and deposits: Credit unions pass off profits to their members in the form of higher dividend rates on deposits and lower rates on loans. This can lead to significant savings and earnings for members.

• Low fees: Credit unions tend to charge fewer and lower fees than banks because they are not-for-profit organizations that aren’t concerned with making a profit for their shareholders.

• Focus on members and community: Credit unions often serve a particular group of people — like employees within a certain profession, residents of a particular state, or members of a specific association. Because of this, credit unions can offer more personalized service and tailor their products, services, and educational resources to best serve their members.

• Federal deposit insurance coverage: Like banks, federally insured credit unions insure your deposits. The National Credit Union Administration (NCUA) insures deposits of up to $250,000 per share owner, per insured credit union, per account ownership category.

• Shared branch banking: Though many credit unions have a limited geographic footprint, many belong to a shared network of credit unions across the country. This allows members of one credit union to bank at another credit union’s branches.

Cons:

• Membership eligibility requirements: You have to become a member of a credit union in order to use its products and services. And to become a member of a credit union, you have to meet its eligibility requirements.

• Membership fee: Many credit unions require a membership fee or deposit when you join. Typically, it’s around $5 to $25.

• Limited product and service offerings: Credit unions tend to be smaller than banks and serve specific populations or geographic areas. This means they may offer fewer products and services than bigger banks.

• Limited branch network: Many credit unions operate within a small geographic area — in a single state, county, or even city. This means you may have fewer options when it comes to in-person banking and finding in-network ATMs.

Read more: Credit union vs. bank: Which is right for you?

How to join a credit union

Taking advantage of all a credit union has to offer hinges on becoming a member. The process of becoming a member varies by credit union, but you can take the following general steps:

Find credit unions you can join

The first step is to find a credit union with a field of membership — that is, the commonality between members — that you qualify for. Some credit unions have narrow requirements, such as working for a particular employer, living within a certain zip code, or being a member of a certain association. Others, however, make it possible for just about anyone to join — often by making a small donation to a partner organization.

To help with your search, you can use the NCUA’s Credit Union Locator. Then, check individual credit unions’ websites to confirm your eligibility.

Compare accounts, rates, and services

To choose the best credit union for your needs, compare accounts, rates, and services across multiple institutions. First, make sure any credit union you’re considering offers the services and account types you need. Your credit union should also be accessible and convenient, whether that means online or in person. Finally, make sure it offers competitive rates and low or no fees.

Submit your application

After you choose a credit union and confirm your eligibility, it’s time to submit an application. Many credit unions offer online applications, but you can also apply in person.

To apply, you typically need to provide proof of address, a photo ID, and your Social Security or Tax Identification Number. Depending on the credit union’s eligibility requirements, you may have to provide additional documentation. If the credit union you’re applying to requires joining or donating to a partner organization, that will also be part of the application process.

Fund your share account

You’ll likely need to fund a share account when you become a member of a credit union. A share account is simply a checking or savings account that holds your “share” of the credit union. Typically, you’ll need to deposit $5 to $25 to fund your share account.