What’s 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.
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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.
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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.
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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 nonprofit cooperatives. Rather than
paying profits to stockholders, credit unions return earnings to members in the
form of dividends or improved services.
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Are savings deposits
insured?
Yes. All savings accounts are insured up to $100,000 by the
NCUA, the National Credit Union Administration, an agency of the federal
government.
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Who can join a credit union?
A
credit union exists to serve a specific group of people, such as a group of
employees or the members of a professional or religious group. This is called a
"field of membership." The field of membership may include where they live,
where they work, or their membership in a social or economic group.
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