What Is a Credit Union?
A credit union is a cooperative, not-for-profit financial institution organized to promote thrift and provide credit to members. Member-owned, it’s controlled through a Board of Directors elected by the membership. Board members serve on a volunteer basis and may hire a management team to run the credit union. The Board also establishes and revises policy, sets dividend and loan rates, and directs certain operations. As a result, members are provided with a safe, convenient place to save and borrow at reasonable rates from an institution that exists to benefit them, not to make a profit.
Who Owns a Credit Union?
Most financial institutions are owned by a group of stockholders, who purchased what they own with the intent of making money from their investment. Credit unions, however, operate differently, with each member owning one “share” of the organization. The people who utilize the credit union’s services are also owners, and are even entitled to vote on important issues such as the election of member representatives to serve on the Board of Directors.
How Did Credit Unions Start?
The first credit union cooperatives started in Germany more than a century ago. Today, credit unions are found everywhere in the world. In this country, the credit union movement started in Man-chester, New Hampshire, when the St. Mary’s Cooperative Credit Association, a church-affiliated credit union, opened its doors in 1909. Today, 1 in every 3 Americans is a credit union member.
What is the purpose of a Credit Union?
The primary purpose in furthering credit unions’ goal of service is to encourage members to save money. Another purpose is to offer loans to members. In fact, credit unions have traditionally made loans to people of ordinary means. Credit unions can charge lower rates for loans as well as pay higher dividends on savings because they’re non-profit cooperatives. Rather than paying profits to stock-holders, credit unions return earnings to members in the form of dividends and improved services.
Are Savings Deposits insured?
Yes. All credit union savings accounts are insured up to $250,000 by the National Credit Union Administration (NCUA), an agency of the federal government.
Who Can Join a Credit Union?
A credit union exists to serve a specific group of people, such as a group of employees or the members of a professional or religious group. Referred to as a “field of membership,” the defining aspects of this group may include where they live, where they work, or a social or economic demographic to which they belong. Whatever those differences may be, however, they share a bond that unites and benefits them equally – their credit union membership.