What is a Credit Union?
A credit union is a not-for-profit financial cooperative that offers a wide range of financial products and services. Like other financial institutions credit unions accept deposits and makes loans. But as a member-owned institution, credit unions focus on and provide exceptional service at reasonable rates and then returns surplus income to their members in the form of dividends. Let’s take a look at some of the differences between credit unions and other financial institutions.
What Makes a Credit Union Different?
When you open an account at a credit union, you're actually buying shares of the company. Rather than becoming a customer, you become part owner: that's why your account is called a "share."
Credit Union’s operate as a not-for-profit financial institution where income is returned to its members in the form of better rates, additional services and dividends.
Credit Unions are run by its members and all members are eligible to run and volunteer on the board of directors.
Credit Unions put people first and they live by the philosophy of “People Helping People”
The Credit Union Difference
In 1935, when credit unions were helping Americans through the Great Depression, the treasurer of a Midwestern credit union said that credit unions were "not for profit, not for charity, but for service," and that philosophy holds true today.
Credit unions continue to look out for their members’ interests and provide a level of service that is not generally available at other financial institutions. Whether it’s providing a loan to help a member cover unexpected medical bills, giving financial counseling to a member whose company closed its doors, or simply offering a better deal on a used car loan, credit unions make a difference for their members and the communities they serve.
Initially, it may be difficult to see the difference in the types of services offered by credit unions or banks and savings and loans. However, once you have spent time in a credit union, you will recognize that there is a world of difference in the attitude and the quality of service which credit unions provide to their members.
Credit unions are not-for-profit financial cooperatives. They give consumers the choice of ownership, because they are owned by the very people they serve. Credit unions exist solely to serve their members, not to enrich an outside group of stockholders.
Credit unions are run by a board of directors, who are volunteers elected by the members of the credit union. The board of directors establish the policies of the credit union. In addition to being an owner, each member, regardless of how much he or she has on deposit, has an equal vote in director elections. Credit unions are democracy in action.
Credit unions are placed in a not-for-profit category because operating income is returned to depositors in the form of higher savings rates and lower loan rates and fees. Credit unions serve as a healthy check on the for-profit banking system. Competitive pricing by credit unions keeps pressure on the banks to increase the rates they pay on savings accounts and lower their fees and rates on loans — all to the benefit of consumers.