A credit union is a cooperative financial institution that is owned and controlled by its members. Credit unions operate on a not-for-profit basis, allowing them to offer better rates and fewer fees than traditional banks.
Credit unions traditionally offer both deposit accounts and lending services. Members of a credit union pool their money together through deposit accounts (i.e. savings accounts, checking accounts, CDs, etc.). When a member of the credit union needs a loan, they are able to borrow from those pooled funds at a set interest rate. The interest paid on loans generates a majority of the credit union’s income.
Although credit unions are non-profit organizations, they still have to make money. The income a credit union generates through loan interest, reinvestment of funds and various fees is used to provide for all of the deposit services, supplemental products/services and operating costs.
Unlike a bank, credit unions do not have shareholders demanding a profit. Credit unions are owned and controlled by their members. This means any profits are returned in the form of dividends and/or reinvested into the credit union allowing for growth in products and services.
Some credit unions restrict their membership to select groups of related people such as a company’s employees and their families. Other credit unions are community based allowing anyone who lives, works, worships or attends school within a given community to join. The largest credit unions may make their membership available to an entire state or the entire United States.
There are over 6,000 credit unions in America serving over 100,000,000 members. Isn’t it time you joined a credit union?