What's a Credit Union?
Credit unions are financial cooperatives. There are three aspects that determine the boundaries of a credit union.
- Member ownership and direction
- Not-for-profit orientation
- Volunteer involvement
Credit unions are formed by groups of people with a common bond who decide they want to be in control of their financial future. These people, called members, furnish the original capital for the credit union to begin. With this money put in as savings, they make low-cost loans to each other. This is where the credit union philiophsy of "people helping people" came from.
This original group of people must have a "common bond". It can be working for the same employer, living in the same community or attending the same church.
This is referred to as the "field of membership". It is possible for credit unions to expand their field of membership to allow smaller employee groups to participate in the benefits of the credit union.
Each member has one share in the credit union and each member has one vote no matter how much or how little the member deposits or borrows. This is the democratic control structure of credit unions.
Not-for-profit does not mean that we do not make money. It is obvious that we have to make money in order to operate. But, we are not about profit. We pay the majority of our income after expenses back to our members in the form of higher interest rates on deposits. And by keeping our loan rates lower that banks, we do not have the profit margin that large commercial banks have.
The Board of Directors and committee members are all volunteers. They are here to help meet the member's expectations, ensuring the quality of service to the members and to oversee the soundness and safety of the credit union. They bear an enormous responsibility in lending their time and experience to the credit union and in most cases, do not get monetary compensations.
All credit unions are regulated by government agencies. Some are regulated by the state they operate in and the federal government regulates some. All federal and many state chartered credit union deposits are insured by the National Credit Union Share Insurance Fund (NCUSIF).