A credit union is a financial institution that is privately owned by its members or customers. Unlike a bank, a credit union operates as a non-profit entity and does not put profitability first. Like banks, credit unions must be concerned about its deposits and lending activities and provide stability and service. Credit unions are nonprofit organizations that provide sound financial services with products very similar to banks for their customer/owners.

Not just anyone can join a credit union. Normally credit unions are formed around a community, a workplace, a religion, or some other type of bond, and the members must share in this bond. If a credit union fails to limit membership in some substantial way they risk losing their status as a credit union. Check our list of local credit unions to see if you can share in the program.

A credit union is run by members who want a voice in how the institution is operated. At the top is a board of directors who make all of decisions concerning credit union operations. The board is made up of elected volunteers who receive no pay. Credit unions have personnel working for the board much like the personnel in a bank, paid employees who manage finances and provide service to credit union members.

In its simplest form, a credit union gets money from its customers in the form of deposits and loans that money out to other customers.

Credit unions typically offer the same products and services as banks. However, some credit unions will choose not to offer every product and service because credit unions do not do the same amount of volume that larger banks do. Banks have to do a lot of marketing and offer a vast array of products to stay competitive. Credit unions will more likely only offer the products and services that a large portion of the membership is likely to use. This keeps down overhead and still serves the community the credit union was established to serve.

Some credit union products have different names than their banking counterparts. Your deposits are called shares because they represent ownership (like shares of stock) in the institution.
Credit unions may not offer all of the products that a bank does, but that doesn’t mean they don’t have clear advantages. Because credit unions tend to focus on service over profitability, the rates can be better at a credit union. On the other hand, if you are a rate shopper you may not find the attractive CD rates that a bank uses to attract deposits. However, a long-term relationship with a good credit union can be profitable.

Credit union deposits are insured very much like your bank deposits. The organization that insures the two types of institutions is different. However, the quality of insurance is the same. The National Credit Union Administration (NCUA) is the federal agency that charters and supervises federal credit unions and insures savings in federal and most state-chartered credit unions across the country through the National Credit Union Share Insurance Fund (NCUSIF), a federal fund backed by the full faith and credit of the United States government.

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