By law, credit union members must have a common bond, such as working for the same employer, living in the same community, or belonging to the same professional association, church, or fraternal group. Even employees of different businesses in the same complex, such as a shopping center, can band together to form credit unions.

Costs. Unlike banks, credit unions are nonprofit organizations. Unconcerned with making a profit, they can often pay more interest on accounts and charge less in fees. They offer a distinct advantage for interest-earning checking accounts, which they call share-draft accounts, because they pay more interest on average and most impose no minimum-balance requirements. Although credit unions do not have extensive branch networks, many belong to a surcharge-free ATM network so you have access to thousands of fee-free ATMs. Credit unions usually offer the best deal available on rates charged on loans and fees charged on accounts. They generally charge less on credit card balances and less for car loans. If you are eligible to join a credit union, you should certainly compare what it has to offer with what's being offered elsewhere.

Services. With some major exceptions, credit unions tend to be on the small side and may not have the resources to offer the kind of services provided by banks and savings and loan associations. Thus they are often not all-purpose financial institutions. Their competitive edge comes chiefly from the rates they pay on savings and checking accounts and the rates they charge for loans.

Safety. The majority of the nation's credit unions are federally insured by the National Credit Union Administration (NCUA), whose National Credit Union Insurance Fund provides the same coverage that FDIC does for banks and thrifts. But many credit unions carry only private insurance. If a credit union doesn't post a sign at the door or teller's window stating, "Insured by the NCUA," ask whether the institution has federal insurance or is applying for it. If the answer is no, take your money elsewhere.

Adapted from Kiplinger's Practical Guide to Your Money, by the editors of Kiplinger's Personal Finance magazine (Kaplan Publishing. Copyright 2005 The Kiplinger Washington Editors, Inc.) Available wherever books are sold or direct at kiplinger.com/store/books.