What is a Credit Union?
Quick definition of credit union
Cooperative financial institution that is owned by its members and
does not have stockholders. Because a credit union is not-for-profit, it
returns earnings to members in the form of more competitive rates of
return on accounts and loans, lower fees and improved services.
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Familiar services
Credit unions offer many of the same services you’d expect from
any financial institution, such as savings and checking accounts, debit
and credit cards, vehicle and mortgage loans, college loans, IRAs and
more. Deposits in credit unions are fully insured up to $250,000 by the
National Credit Union Share Insurance Fund – similar to
banks’ FDIC insurance.
Structural difference
Credit union services can cost hundreds of dollars per year less than
other financials due to how credit unions are structured and owned;
credit unions do not have highly paid stockholder-owners expecting to
earn hefty profits. Instead, credit unions have volunteer (unpaid)
boards elected by the membership to look after members’ best
interests. They are not-for-profit, meaning they return earnings to
depositors (members) in the form of more competitive rates of return on
accounts and loans, lower fees and improved services. The affordable
services offered by credit unions ensure competition for financial
services, which benefits all consumers.
Local ownership and control
Credit unions are owned and organized as cooperatives. For example, a
cooperative grocery store allows people to pool their purchasing power
to buy goods at more competitive rates. Credit unions are much the same
– think of it as depositors pooling funds to save and lend to one
another at more reasonable rates. Each deposit in a credit union (no
matter how big or small) is an ownership share (checking accounts are
called "share draft" accounts).
Because credit unions are member-owned, each depositor has one vote
and can participate in annual meetings that affect how the credit union
is run. This democratic control benefits the communities the credit
unions are in. As bank mega-mergers put the fee-squeeze on consumers and
push decisions about lending away from local communities, democratically
controlled credit unions keep service levels high and decisions about
service close to home.
The "Credit Union Difference"
Because credit unions exist not for profit but to serve their
members, credit unions behave in ways banks don’t. For example,
credit unions make small loans to consumers that many financials would
consider “unprofitable” – loans for $1,000, $500, or
even less. They’ll also open savings accounts for smaller amounts,
and generally look for ways to avoid imposing fees. Because they
aren’t focused on profit-making, credit unions also spend time
with members to encourage savings and financial responsibility. Many
offer consumer education and referrals for debt counseling to help
members experiencing financial problems.
How to join
Many credit unions are open to the community – unlike years ago
when credit unions were chiefly made up of employees of sponsoring
companies – thanks to recent changes in federal law affecting
credit union membership. Currently, nearly two million Wisconsin
residents belong to almost 230 credit unions, of which more than a
third are open to the local community. To join, just look one up in the
phone book, or click
here to find a credit union near you.
