About Credit Unions

One of the main reasons people join credit unions is because they want to enjoy personalized service. While traditional banks advertise and function as profit-making organizations, credit unions are community-oriented and cater to members rather than to bank owners or stockholders. Any earnings a credit union accumulates in the process of doing business are used for the benefit of its membership. For example, a dividend may be issued or fees for financial services may be reduced.

Identification

Credit unions are cooperative, not for profit, organizations owned and operated by its members. The credit union functions to serve its members by providing loans at favorable interest rates and offering low-fee savings accounts and other financial services. By pooling their assets into the credit union, members themselves provide funds to make loans to each other.

History

Credit unions began in the mid-1800s by a group of tradespeople in Rochdale, England. The idea was to combine their resources to buy goods in bulk at a discount and make those goods available to their members at reasonable prices. The concept spread to Germany, Canada and the United States over the next half-century and continues today. In the United States, some smaller credit unions have merged with larger ones, but overall membership has increased to almost 85 million according to the Credit Union National Association (CUNA).

Characteristics

A board of elected member volunteers runs the credit union. In contrast, a typical traditional bank will employ a paid board of directors to oversee the institution. Credit unions may be sponsored by employers, churches, schools or even communities of current residents. Employer sponsored credit unions usually allow employee family members to join.

Accountability

Federal credit unions are chartered and monitored by the National Credit Union Association (NCUA). NCUA stipulates certain rules of organization and operation to which a federal credit union must adhere. NCUA also provides insurance to depositor members of credit unions through the National Credit Union Share Insurance Fund (NCUSIF). Similar to FDIC insurance, which is commonly provided by traditional banks, NCUSIF is backed by the United States government.

Considerations

While most credit unions are federally insured, some are not. However, those that are not may be asked to report to NCUA by its state regulators. You may call CUNA at [phone] for assistance in locating a credit union in your area. Alternately, you can use the online credit union locator tool (see Resources below).

Resources

• National Credit Union Association (NCUA)
• Credit Union National Association (CUNA)
• Credit Union locator tool