Credit Union Difference
FAQs About Credit Unions/ October 30th, 2020
Today over 6,000 credit unions serve more than 115 million Americans around the country. Even if you're already a credit union member, you may not understand how credit unions differ from financial institutions like banks. This article will answer some of your questions.
What Is a Credit Union?
A credit union is a cooperative financial institution, owned and controlled by its members. Credit unions typically serve groups of people who have something in common—where they live or work, for example. Becoming a member of a credit union carries power because credit unions are not-for-profit and exist to provide members with a place to save money and get loans at reasonable rates.
The National Credit Union Administration, an agency of the federal government, insures deposits of credit union members at more than 98% of federal and state-chartered credit unions nationwide, and the remainder are insured by safe private insurers. Deposits are insured up to $250,000.
How Did Credit Unions Form?
The first credit unions were started in Germany in 1850s. Villagers pooled their money to provide loans to each other. The modern credit union movement grew out of an idea that people could work together to create solutions to meet their financial needs.
What Is the Credit Union Philosophy?
Its philosophy and guiding principle is "not for profit, not for charity, but for service." Credit unions look out for their members' interests and provide a level of service that generally is not available at other financial institutions. Whether it's providing a loan to help cover unexpected medical bills, giving financial counseling to a member whose employer closed its doors, or simply offering a better deal on a used-car loan or mortgage, credit unions make a difference for their members and the communities they serve.
What Makes a Credit Union Different from a Bank?
Credit unions accept deposits, make loans, and provide the same services as banks. The main difference between the two lies in who they work for. Banks exist to make money for their stockholders, not for their depositors. Credit unions don’t have stockholders. Instead, they exist to serve their member-owners, and benefits are returned in lower loan rates and higher deposit rates.
Credit unions are the only democratically controlled financial institutions in the U.S. Members elect a volunteer board of qualified individuals to oversee the credit union and the president reports to this board. Bank directors, however, are paid and legally bound to make decisions that benefit stockholders, not customers.
The Credit Union National Association (CUNA) compared the average credit union saving account yields, loan interest rates, and fees to those of banks. On average, credit unions provided about $110 per member and $231 per household more to their members in benefits than banks.
How Can I Join a Credit Union?
To join a credit union, you can live or work in a "charter area," or belong to one of its select employee groups. Go to Your Money Further to find a credit union near you.