What is a Credit Union?

Consumer Info

Credit Unions Are a Smarter Choice
Wisconsin's Credit Unions Unite for Good

Quick Definition

Cooperative financial institution (co-op) 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 and fewer fees and improved services. 

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, student 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 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. Since 2007, Wisconsin credit unions have saved their members close to $2 billion. The Wisconsin credit union Scorecard details how credit unions are returning value to their members and communities beyond this simple summary.  

A Movement United by Mission

State law says a credit union’s mission is to:

“encourage thrift among its members, create a source of fair credit at a fair and reasonable cost, and provide an opportunity for its members to improve their economic and social conditions.” - Wis. Stats. § 186.01(2).

This means that credit unions must serve all members regardless of wealth, account balances or income. Banks needn’t be concerned for customers’ financial well-being, whereas credit union decision-making is driven by anticipated effects on members’ financial wellness. At banks, only a few stockholders benefit, while at member-owned credit unions, all members benefit.

While for-profit financial institutions compete aggressively with one another, credit unions collaborate because we consider ourselves a "Movement" - a group looking to advance a shared ideal. And in Wisconsin, credit unions unite for good as one League, leveraging their cooperation. History reveals that credit unions' greatest growth spurts have occurred during the Great Depression and several economic recessions, precisely because credit unions are there for people when they're needed most.

Local Ownership & Control

Credit unions are owned and organized as cooperatives that share a set of operating principles. 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.    

People Over Profits

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. Collectively, credit unions offer consumer education as well as more than 500,000 hours of free financial counseling to their members annually. Credit unions also have a greater presence in Wisconsin schools than any other type of financial institution, sponsoring more than 100 student-run, in-school branches, "reality fairs," and other support to teach saving and money management. This support has helped a majority of Wisconsin public high schools implement their own personal finance requirement for graduation, with no state mandate requiring it and at no additional cost to taxpayers.

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. Membership is established by placing a small amount on deposit, usually $25, or less (fund that remain yours; there is no membership fee). Currently, 3 million Wisconsin residents belong to 140 credit unions, many of which are open to the local community. Everyone can find a credit union they're eligible to join!