Credit Union Difference
Credit unions are financial institutions with savings, loans, branches, and tellers. Is there really a difference between a credit union and a bank?
The answer is yes!
Credit Unions are member-owned, not-for-profit financial cooperatives. That means each member (or to translate into banking terms “account holder”) is an equal owner of the credit union. Through membership, members pool their savings and from that pool make loans to other members. As the loans are paid back to the credit union, money is generated through interest payments that can be used to pay dividends to members for their savings.
The philosophy of “People Helping People” is at work in the day to day operations of every credit union. The primary concern of a credit union is not how to make the highest possible profits, but rather how to pay the highest possible dividends on savings while charging the lowest possible interest rates on loans with minimal or no fees.
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. It is member-owned and controlled through a board of directors elected by the membership. The board serves 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. The result: members are provided with a safe, convenient place to save and borrow at reasonable rates at an institution which exists to benefit them, not to make a profit.
Who owns a credit union?
Most financial institutions are owned by stockholders, who own a part of the institution and intend on making money from their investment. A credit union doesn’t operate in that manner. Rather, each credit union member owns one “share” of the organization. The user of credit union services is also an owner, and is 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 over a century ago. Today, credit unions are found everywhere in the world. The credit union movement started in this country in Manchester, New Hampshire. There, the St. Mary’s Cooperative Credit Association, a church-affiliated credit union, opened its doors in 1909. Today, one in every three Americans is a credit union member.
What is the purpose of a credit union?
The primary purpose in furthering their 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 are not for profit cooperatives. Rather than paying profits to stockholders, credit unions return earnings to members in the form of dividends or improved services.
Are savings deposits insured?
Yes. All savings accounts are insured up to $250,000 by the NCUA, the National Credit Union Administration, an agency of the federal government. (IRA accounts are insured separately for up to an additional $250,000.)
Credit Unions are owned and directed by members. Unlike banks, that maximize profits for a small group of investors, credit unions exist to serve their members, including working families, small businesses and the local community. Because credit unions return benefits to members they are able to offer higher returns on savings and lower fees. That’s why your credit union is not-for-profit and tax exempt.
Banks and some politicians in Washington are pushing to tax credit unions, like Blue Flame Credit Union, despite the fact that we are not-for-profit.
“Don’t Tax My Credit Union” is the message we need to send to Congress. It is easy to take action, visit Don’tTaxMyCreditUnion.org to contact your U.S. Representatives and Senators. While there, you can also watch a video and learn more about how you can help tell Congress, “Don’t Tax My Credit Union!”