What is a Credit Union?What is a Credit
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 Union Membership?
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 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 Unions Offer?
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 agency.
How Do Credit Unions
Differ From Banks And Other Types of Financial Institutions?
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.