Credit Unions 101: State vs. Federal Charter

Smart financial management starts with understanding the institution that looks after your financial needs. Why might people choose a credit union to manage their financial needs, as opposed to a traditional bank, and what exactly is a credit union charter? Read on to learn more!

Why Join a Credit Union?
While plenty of people choose traditional banking services, others prefer to join a credit union. A credit union is a not-for-profit institution that has members, rather than customers. While banks seek to maximize profits and distribute these to their stockholders, profit earned by a credit union is returned to its members.

There are lots of reasons to consider when selecting your financial institutions! People who belong to a credit union often cite friendly customer service and better rates as just two major benefits of belonging to a credit union.

A Credit Union’s Charter
All credit unions need a license to operate, also known as a charter. This charter may be issued by a state credit union regulator, or by the National Credit Union Administration. The United States is unique in its dual chartering system. By giving credit unions a choice between a state or a federal charter, credit unions can choose the regulatory philosophy most appropriate to the goals of the institution and its members.

State vs. Federal Charter
A state-chartered credit union must abide by state-specific guidelines, whereas a federally chartered credit union is regulated by the National Credit Union Association. In general, smaller credit unions may prefer to hold a state charter, whereas a larger or interstate credit unions would typically prefer to operate under a federal regulatory environment. Having a dual chartering system is beneficial for both types of credit union, because the system encourages innovation, responsive regulation, and lower costs across the board.

Harvard Federal Credit Union
Our credit union recently changed from a state-chartered credit union, to become a federally chartered credit union. We are now Harvard Federal Credit Union, or Harvard FCU.

This change won’t impact our members on a day-to-day basis. From banking online, to managing your savings or loans, to using your credit and debit cards—it’s all business as usual! But, you may notice a fresh look and new logo in our branches and online.

The reason for the change to a federal charter is simple. We believe that moving to a federal charter will enhance our ability to compete and thrive in today’s dynamic financial marketplace, allowing us to better serve and empower our members. Our services remain the same and we will have more opportunities to offer! If you’re interested in learning more, check out our FAQs online.