What is a Credit Union?
A credit union is a member-owned, not-for-profit cooperative
financial institution owned and operated by its members.
These members -- who are united by a common bond of employment,
association, or community -- democratically operate the
credit union under state and federal regulation. There are
more than 11,000 credit unions in the United States and
Canada, serving more than 77 million members.
What are the Benefits of Credit
Credit unions exist solely for the purpose of meeting the
financial needs of their member-owners. To that end, credit
unions not only provide outstanding personal service, but
members often earn higher returns on their savings while
paying lower rates for loans. Each year, credit unions consistently
outshine banks and S&Ls in the area of consumer/member
satisfaction. Credit unions are based on a one-member, one-vote
structure, thus giving members the power to direct credit
union policy in an effort to meet member needs. This structure
is vastly different from the for-profit sector where stockholders
vote according to the number of shares of stock they own.
Their not-for-profit status enables credit unions to return
more of their earnings to their members in the form of competitive
loan and savings rates. For instance, credit unions usually
charge lower interest on credit cards than most other providers,
and many credit unions charge no annual card fee.
Who Can Join a Credit Union?
Credit union members generally share a common bond such
as occupation (same employment or line of work), residence
(live or work in the same area), association (same church,
professional, civic or fraternal group, etc.) and family
(membership is extended to any member's immediate family).
Federal and state credit union laws restrict credit unions
to serve only the groups specified in their charters. The
group or groups served by a credit union are referred to
as its field of membership (FOM).
What Types of Services Do Credit
Because each credit union is autonomous, the financial
products and services offered vary. For example, while most
credit unions offer savings accounts and consumer loans,
many also offer a full spectrum of financial products and
services such as dividend-bearing checking accounts, payroll
deduction, direct deposit, automated teller machines (ATMs),
credit cards, individual retirement accounts (IRAs), share
certificates (similar to Certificates of Deposit, or CDs),
money orders, traveler's checks, home mortgage loans and
much more. And best of all, credit unions are safe and sound
-- US deposits are federally insured up to $250,000 by the
National Credit Union Administration, a U.S. government
How Do Credit Unions Differ
From Banks And Other Types of Financial Institutions?
The biggest difference between credit unions and other
financial institutions is that the members are the owners.
Credit unions exist solely to serve their member-owners,
who are the only depositors. The benefits of ownership are
returned to the member in the form of lower rates, bigger
dividends, and personal service. After meeting normal expenses
and the reserve requirements needed to ensure financial
stability, credit unions return all net earnings to their
members in one form or another. The absence of a profit
motive allows credit unions to focus their energy on meeting
members' needs -- and this has helped credit unions follow
a different path from that taken by other financial institutions.
Instead of trying to maximize revenues from members, credit
unions act as partners in promoting the financial well-being
of those who use their services.