Do You Have to Keep a Minimum Balance at a Credit Union?

Credit unions operate much like banks. You can open checking and savings accounts, get a loan and make use of other banking services offered by the credit union. However, there are some important differences between credit unions and banks.

One major difference is that not just anyone can open an account at any credit union. Every credit union must have specific requirements for membership. Only someone who meets the requirements can be a member.

One of the requirements is to maintain a minimum balance with the credit union. This balance is required for you to have ownership of your share in the credit union.

Learn more about how credit union membership works.

What's Required to Hold a Credit Union Share

When you join a credit union, you’re not just opening an account at the credit union. You are becoming a partial owner of the credit union.

Banks are owned by shareholders. They are legally obligated to work for the benefit of those shareholders. For that reason, big banks pay low interest rates and charge high fees. Rather than putting money into their customers’ pockets, banks seek to enrich their shareholders.

Credit unions are owned by the very people who do their banking at the credit union. Anyone who has an account at the credit union owns a share of the credit union. It doesn’t matter whether you have a balance of $5, $500, or $500,000. You’ll own one share of the credit union.

This unique ownership structure means that credit unions work for the benefit of its owners, who are its customers. That’s why many credit unions charge lower fees and pay more interest than traditional banks do.

Credit unions are required to set a “par value” for a share in the credit union. Usually, this value is low, in the range of $5 to $25. You must maintain a balance that is greater than or equal to the par value of a share to remain a member of the credit union. If your balance falls below the par value of a share, you run the risk of having your account closed and membership revoked.

What If You Just Want a Loan or Credit Card?

So, what if you don’t want to open an account at a credit union and just need a loan or credit card? The requirements are the same. You’ll have to meet the membership criteria and maintain a balance sufficient to own a share in a deposit account, such as a savings account. Often, credit unions call these “share savings accounts.”

Before you apply for the loan, you’ll need to open the deposit account. Once that’s done, you can apply for the loan.

Yet another benefit of the community ownership and community focus of credit unions is their lending practices. Credit unions benefit when you benefit. They might be able to be more flexible with lending than a large bank would be. If you’re a long-time credit union customer, you probably know the people at the credit union. That recognition can help the credit union customize the services they provide and to give you the benefit of the doubt if you need a loan or are asking for a fee to be waived.

Credit Union Membership Requirements

As mentioned before, you can’t just join any credit union you’d like. By law, credit unions have to restrict membership. How the credit unions restrict membership is up to them, but there are three general types of membership restriction.

Location-based

One common criterion for membership in a credit union is location-based membership. For example, Greater Springfield Credit Union might only allow residents of Springfield and its neighboring towns to become members. If you don’t live near Springfield, you won’t be able to become a member and open an account.

Association-based

Another common criterion is membership in a specific organization. One example of this is the Harvard University Employees’ Credit Union. As the name implies, only employees and relatives of employees of Harvard University can open an account at HUECU.

There are credit unions that restrict membership to members of certain parishes, some that are only open to members of a specific union, and so on. A credit union can restrict membership to members of nearly any organization or group.

Flexible membership

The good news is that not all credit unions are as restrictive about membership. Some credit unions allow almost anyone to become a member.
One example is Alliant Credit Union. You can become a member by meeting one of the following requirements:

• Be a current or retired employee of one of Alliant’s partnered businesses/organizations
• Be an immediate family member of an Alliant member
• Have donated at least $10 to Foster Care to Success, a non-profit benefit foster teens
• Live or work near Alliant's Chicago headquarters

In effect, that means anyone can become a member of Alliant. All you have to do is make a $10 donation and you become eligible.

Other credit unions might have similarly easy to meet requirements. If you’re looking to join a credit union, just find one with flexible requirements.

Inactive and Dormant Accounts

One thing to watch out for is dormancy or inactivity fees charged by credit unions. Many credit unions have rules about closing accounts that are not used, so just maintaining a minimum balance might not be enough to stay a member.

Under the National Credit Union Administration Federal Credit Union bylaws, an FCU may terminate a member’s membership if their balance falls below the par value of a share. Relatedly, credit unions are allowed to charge fees that could cause your balance to drop below the requirement.

It’s common for credit unions to assess fees on accounts that haven’t been used for a year or more. This fee could be just a few dollars a month, but it can add up over time. If you open an account and forget about, a few years later your balance, and membership in the credit union, could disappear.

The good news is that you’ll have a lot of notice before you lose your credit union membership.

First, most, if not all, credit unions will notify you before they start charging dormancy fees on your accounts. If you get a notification that you’re going to be charged with having an inactive account, make a deposit or withdrawal as soon as you can. That will reset the timer and let you avoid the fee.

One easy way to do this is to set up recurring transactions on your account. For example, set up a recurring $1 monthly deposit into the account. The account will never become inactive and you’ll never deal with an inactivity fee.

Once your balance at a credit union falls below the par value of a share, your membership can be canceled. However, the credit union cannot cancel your membership right away. NCUA bylaws require that there be a grace period before your membership is canceled. While the length of the grace period is up to the credit union, it can be no time at all and must be “reasonable.” Generally, this means the grace period is a few weeks to a few months.

If your balance ever falls below the required amount, there’s only one thing to do to maintain your membership. Make a deposit to your account to increase your balance above the minimum. So long as you can get your balance back where it needs to be, your account won’t be closed and your membership won’t be revoked.

Are Credit Unions Safe?

One thing to like about banks is their incredible safety.

The Federal Deposit Insurance Corporation was founded in the wake of the Great Depression to restore confidence in the banking system. The FDIC insures accounts at banks, up to a limit of $250,000 per account type per depositor. If you open a bank account and the bank becomes unable to return your money when you request it, the FDIC will reimburse you.

If you’re considering opening an account at a credit union, you may worry about the safety of your money. The good news is that there is a credit union equivalent to the FDIC: The National Credit Union Administration.

Like the FDIC, the NCUA is an independent federal agency that insures balances at credit unions. It provides identical protections to the FDIC, so you can feel safe about making deposits at a credit union.

Conclusion

Credit unions are a good alternative to banks for many people. They are community-owned and community-focused, unlike banks, who focus on generating profits for their shareholders. This unique ownership system means that, in many cases, you’ll get a better deal by working with a credit union.

Take the time to look into credit unions near you and to find out which ones you are eligible to join. The small effort it takes can pay dividends in the long run.