What is a Credit Union
Federal credit unions are cooperative, not-for-profit financial institutions. Credit unions are formed by an organized group of people that share a common bond, which can be people with a common employer, or people living in the same community.
Credit unions are owned and controlled by its members, which are also its customers. Members pool their assets together to provide loans and other financial services to each other. Unlike banks, which are owned by outside shareholders and are for-profit, credit union members are paid dividends if there is any excess profit.
Credit unions are controlled through the election of a board of directions drawn from its membership. Usually, credit union board members work on a volunteer basis.
Benefits of Credit Unions – Not for profit, not for charity, but for service
Fees and Interest Rates Being a member of a credit union has many benefits. Because credit unions are non-profit, members get to enjoy a safe, convenient place to save and borrow money at reasonable rates. Credit unions typically offer lower rates on home and car loans, lower fees overall and higher rates for savings accounts.
For-profit banks do not have the best interest of their customers in mind. Their goal is to make as much profit as possible, and that is passed on to their customers with higher interest rates on loans and tons of banking fees.
No Charge ATM Networks If you’re always finding yourself at the ATM, then you’ll love that credit unions ATMs have no surcharges.
Financial Education – It is in the best interest of a credit union cooperative to educate its members. Credit unions are tied to the community by its members, so teaching members about financial responsibility and thrift helps the community as a whole. Programs include financial education, counseling, first-time homebuyer programs, youth education, and many more.
Insured, just Like Banks
Member deposits in federal credit unions are insured, up to $100,000 per account (depending on account ownership) and $250,000 for retirement accounts, by the National Credit Union Share Insurance Fund (NCUSIF) and backed by the full faith and credit of the U.S. Government. Member savings are also protected by a number of provisions in the Federal Credit Union Act and the standard Bylaws.
Some protections are:
- 1. All persons handling or having custody of credit union funds must be bonded.
- 2. The affairs of the credit union and the records of the treasurer are audited by the supervisory committee or a contracted licensed CPA.
- 3. The Federal Credit Union Act and Bylaws require fund reserves for uncollectible loans.
- 4. Credit unions may invest surplus funds only in specified investments.
Tags: atm, bank fees, board members, community, credit unions, interest rates, lower fees