Credit Union
What Is a Credit Union?
A credit union is a member-owned financial cooperative that provides banking services such as savings accounts, loans, and payment services. Unlike traditional banks, credit unions are not-for-profit institutions. This means they are owned by their members and operate primarily to serve those members rather than generate profits for shareholders.
People typically join credit unions through a shared connection called a field of membership, such as living in a certain community, working for a specific employer, or belonging to an organization.
Why It Matters
Credit unions often offer lower loan rates, higher savings yields, and fewer fees than many traditional banks. Because members are also owners, earnings are typically returned to members through better financial products and services.
Credit unions also play an important role in community banking and financial inclusion by serving local populations and specific groups.
How Credit Unions Work
When someone joins a credit union, they usually deposit a small amount of money into a share account, which represents their ownership stake in the cooperative.
Credit unions provide services similar to banks, including:
- savings accounts
- checking accounts (share draft accounts)
- credit cards
- personal and auto loans
- mortgages
Instead of paying interest to investors, credit unions distribute earnings to members through dividends, improved services, or reduced fees.
Credit Union vs Bank
- Credit unions are member-owned cooperatives.
- Banks are typically for-profit institutions owned by shareholders.
Both provide similar financial services, but their ownership structures differ.
FAQs About Credit Unions
Are credit unions safe?
Yes. Most are insured by the National Credit Union Administration (NCUA).
Can anyone join a credit union?
Membership depends on eligibility requirements set by the credit union.
Do credit unions offer the same services as banks?
Yes, including loans, savings accounts, and digital banking.
Related Terms
- Federal Credit Union
- State-Chartered Credit Union
- Share Account
- Credit Union Dividends
- NCUA Insurance
- America’s Credit Union
