What is a Credit Union?

Some people would prefer banking with a credit union instead of a bank. One in every three Americans belongs to a credit union. Credit union is referred as a non-profit cooperative financial institution. A credit union is ultimately managed by a volunteer board of directors, elected by the general membership, which hires and manages a team of financial professionals to oversee the credit union's day-to-day operations. But in reality, credit unions are much like the banks you see every day.

In addition to checking and savings they also offer credit cards, direct deposit, safe deposit boxes, online banking, Internet bill pay and electronic statements just like a bank would. "When it comes to personal attention, high-quality service and low fees, credit unions continue to knock the socks off other providers in the financial services marketplace," says Daniel A. Mica, president and CEO of Credit Union National Association. Americans seem to agree. Credit unions have topped the consumer satisfaction ratings in American Banker's annual survey for 12 years in a row. The first American credit union was founded in 1909 in Manchester, N.H. Credit unions have prospered since then, but their popularity was limited due to convenience - they couldn't offer as many branch locations as a bank. To suffice and, in more recent times, credit unions have as many automated teller machines (ATM) as the bigger banks. You can usually find these in convenience stores like 7 Eleven. They have also started to solve the lack-of-ATM problem by joining networks such as Pulse. So where you would normally pay surcharge, this is often waived for a being a Credit Union member.

For many years, credit unions were open to membership only to people who worked for specific employers like city governments, hospitals or railroads. This was because the credit union was chartered to those employers. Today, some credit unions are chartered to communities rather than employment groups. So if you live or work in that community you are eligible for membership in a credit union chartered to that community. If you attend school or go to church in that community, that will often qualify you as well. Each depositor is insured up to $100,000.00 and sometimes more by the NCUA (National Credit Union Administration), a federal agency. Because credit unions are nonprofit, they can offer lower rates for loans and lower interest rates on credit cards overall than any other financial institution. Instead of paying stockholders, credit unions return earnings to their members in the form of dividends or improved services. Lower overhead means lower rates! Credit unions have a wonderful philosophy about membership: once a member, always a member. So once you are a member, you can continue to enjoy the benefits of credit union membership even if you move out of the area!