Credit unions have been around since before the Great Depression. When people of modest means were unable to get loans from banks, a group of people combined their funds together to lend to one another. This same founding principle of “people helping people” is being practiced by credit unions today.
A common misunderstanding is in the word “union”. But don’t confuse a credit union with a “union”. A credit union is not a “union”. A credit union is a group of people who place funds at the credit union they belong to (deposits) so that other people within that group, including themselves, have access to borrowing the funds at a fair and reasonable rate.
Credit unions are not-for-profit financial cooperatives. Members of the credit union benefit from lower loan rates, higher savings rates and lower fees.
The main differences between a credit union and bank:
|Not-for-profit financial cooperatives||For profit financial institutions|
|Members are owners with equal shareholders of the organization with democratic control||Controlled by stockholders and paid officials; customers have no voice|
|Volunteer Board of Directors elected by the members who represent the members’ best interest||Paid Board of Directors represent the stockholders’ best interest; no voting privileges for customers|
|Cooperation amongst other credit unions||Other financial institutions are competition|
|Driven by member service||Driven by profits|
|Return profits to members in the form of lower loan rates, higher savings rates, and lower fees||Return profits to stockholders only|
|Federally insured by the National Credit Union Administration (NCUA)||Federally insured by the Federal Deposit Insurance Corporation (FDIC)|