With banks tightening lending standards and interest rates headed north, where do you turn? For 90 million Americans, the answer is credit unions.

Credit unions, which, unlike banks, are owned and governed by their members, are often misunderstood as exclusive places with limited services. But in reality, most Americans are eligible to join them and they provide an increasingly diverse array of services, including free ATM use, electronic banking, loans, and interest-bearing savings accounts.

Here are answers to common questions about credit unions:

Am I eligible to join a credit union?
While membership in a credit union depends on belonging to certain communities, such as a workplace, region, or church, Becker says most consumers are eligible, even though many don’t realize it. “Virtually everyone in the nation could find a credit union they could join if they went through the effort,” he says.

So how do you find one? Websites such as NCUA, Find a Credit Union, and the Credit Union National Association can help. In addition, ask around—your employer, spouse’s employer, or local government council can direct you as well.

Do credit unions offer better interest rates?
On average, credit unions offer lower rates on loans and higher rates on savings accounts—just what consumers want. This chart from the National Association of Federal Credit Unions shows that the average bank rate on a four-year, new-car loan is 6.92 percent. At credit unions, it’s 5.43 percent. Similarly, a five-year CD for $10,000 returns 3.54 percent at banks on average compared with 3.94 percent at a credit union.

Many credit unions also have limits on interest rates; federally charted credit unions, for example, have an 18 percent limit that applies to all loans, including those for cars and credit cards.

Have credit unions been affected by the current financial crisis?
Like banks, credit unions have experienced a rise in delinquencies this year, says Fred Becker, president of the National Association of Federal Credit Unions. But he thinks credit unions are less affected by the crisis than banks because a strong sense of community responsibility drives credit union members to repay their loans on time. “They realize they’re adversely affecting other members if they don’t pay back the loan,” Becker says, adding that at one church credit union, you don’t attend Sunday service without your car payment.

Are deposits insured the same way they are at banks?
Yes. Credit unions are insured by the National Credit Union Administration, which provides the same protections—insurance coverage on deposits up to $250,000—that the FDIC provides to banks. NCUA’s website allows credit union members to check on their insurance coverage.

Do credit unions ever collapse?
Like banks, credit unions can fold but, also like banks, that usually means they merge with another credit union. Regardless of what happens, members are protected through the NCUA insurance. NCUA says if a federally insured credit union does fail, members typically receive payments for their deposits within three days.

What about financial literacy—can a credit union teach me how to make smart money decisions?
Credit unions pride themselves on being a top source for financial information. Many offer seminars and information on topics such as preventing identity theft and managing credit cards. More information on any of these topics can be found at the NCUA website or by contacting your local credit union.

http://money.usnews.com/money/articles/2008/10/21/the-benefits-of-credit-unions