Definition
A credit union is a member-owned financial cooperative that provides traditional banking services. These not-for-profit organizations exist to serve their members rather than to maximize corporate profits. Credit unions may offer a full range of financial services, including savings and checking accounts, loans, credit cards, and investment products, often at more favorable interest rates and with lower fees than those provided by commercial banks. Credit unions are regulated by the National Credit Union Administration (NCUA) for federal credit unions or by the state in which they operate for state credit unions.
Examples
- Navy Federal Credit Union: This is one of the largest credit unions in the world, serving members of the armed forces, veterans, and their families.
- Alliant Credit Union: Originally formed for employees of United Airlines, it has grown to become one of the largest credit unions in the United States.
- DUCA Credit Union: Based in Canada, it serves a broad membership base and offers a wide range of financial services.
Frequently Asked Questions (FAQs)
What are the benefits of joining a credit union?
Credit unions can offer lower loan rates, higher savings rates, and fewer fees compared to traditional banks. Additionally, they often provide personalized customer service and a sense of community among members.
How can I join a credit union?
Membership is typically based on shared characteristics among members, such as living in the same community, working for the same employer, or belonging to the same religious or labor group. Many credit unions also allow family members of current members to join.
Are my deposits safe in a credit union?
Yes, deposits at federal credit unions are insured by the National Credit Union Share Insurance Fund (NCUSIF), which is backed by the full faith and credit of the U.S. government.
Can credit unions provide the same services as banks?
Yes, most credit unions offer a full range of financial services, including savings and checking accounts, loans, credit cards, and investment products.
How do credit unions decide on loan interest rates?
Loan interest rates at credit unions are typically lower than rates at commercial banks, as credit unions are not-for-profit entities that return earnings to their members in the form of lower rates on loans and higher rates on deposits.
Related Terms
- Bank: A financial institution licensed to receive deposits and make loans, unlike credit unions, banks may operate for profit.
- Savings and Loan Association: A financial institution specializing in accepting savings deposits and making mortgage and other loans.
- Mutual Fund: An investment vehicle that pools funds from many investors to purchase securities.
- Cooperative: An organization owned and operated by a group of individuals for their mutual benefit.
Online References
- National Credit Union Administration (NCUA)
- Credit Union National Association (CUNA)
- World Council of Credit Unions (WOCCU)
Suggested Books for Further Studies
- “The Credit Union World: Theory, Process, Practice” by Wendell Cochran
- “Credit Union Strategy and Performance: A Balanced Scorecard Approach” by Robert G. Kazal
- “Modern Money Mechanics” by Federal Reserve Bank of Chicago
- “Financial Management for Credit Unions” by Edwin S. Neave
Fundamentals of Credit Union: Finance Basics Quiz
Thank you for learning about credit unions with us! Your understanding of how these cooperative financial institutions work is essential in making informed financial decisions.
