What Is A Credit Union?

Credit unions - A Definition

A credit union is a member-owned, not-for-profit, cooperative financial institution, formed to permit those in the field of membership to pool their savings, lend to one another, and own the organization where they save, borrow, and obtain related financial services. Since credit unions exist solely to serve their member-owners, you can be assured of favorable rates on your savings investments and competitively-priced, low interest rates on your loans.

Credit unions are meeting the financial needs of people all over the world. In fact, nearly 82 million people nationally belong to almost 10,000 credit unions, reaching over one-third of the nation's population. Virginia's 228 credit unions are owned by almost 3 million Virginians, and collectively control almost $40 billion in assets. In the District of Columbia, more than a half-million consumers are the member-owners of 68 not-for-profit credit unions.

Join a credit union today and start taking advantage of member ownership.

Credit unions may look like banks in that they both offer financial products and services to consumers. But that's where the similarities end and the differences begin.

As cooperative organizations, credit unions exist solely to meet their members' financial needs, not to make a profit off of them. In fact, after expenses are paid and reserves are set aside, credit unions return their "profits" to members in the forms of lower loan rates, higher savings rates and free or low-cost services. That's why consumers typically get better rates at credit unions. For-profit financial institutions, on the other hand, exist to generate profits for a relatively small group of stockholders at the expense of their customers.

As a member-owner of a credit union, you have a voice in the overall governance of the credit union. Each credit union is run by a volunteer board of directors elected by, and from, the membership. This democratic process ensures the board remains accountable to the membership. At for-profit financial institutions, the boards of directors are accountable only to stockholders, not to customers.

While for-profit financial institutions can serve anyone in the general public, credit unions can serve only the individuals within their fields of membership. A credit union's field of membership is the association, affiliation or residential area stipulated in its charter that legally defines who may become a member.

Credit unions were created to enable people to pool their financial resources to help themselves and each other. Credit unions still operate by this People Helping People philosophy today. They exist to bring people together in a cooperative effort so these people can receive low-cost, high-quality financial services. This philosophy helps explain why since 1984, credit union members have been more satisfied with the service they receive from their credit unions than bank customers are, according to a well-known national survey of consumers' attitudes toward financial institutions.

Credit unions are not known just for their outstanding service, however. They are also known for their strong financial condition. In fact, credit unions are in the midst of one of their most successful periods ever.

Membership continues to increase. Capital ratios are at their highest levels ever. In simple terms, capital represents a credit union's net worth. Meanwhile, loan delinquency rates continue to drop. And the National Credit Union Share Insurance Fund, the federal fund that insures credit union deposits, continues to be the strongest deposit insurance fund in the nation.

Credit Union History
Credit unions originated in Europe more than 150 years ago as unique depository institutions created, not for profit, but to serve members as credit cooperatives. The earliest financial cooperatives date back to the beginning of 19th century in England. However, in the mid-1800's Germany was the home of the first credit unions as we know them today. [More here]

Can anyone join a credit union?
Credit unions are for everyone, but not everyone can belong to a given credit union. The members of each credit union must share a "common bond," such as being employed at the same workplace, belonging to the same church or fraternal organization, or living in the same neighborhood. Some credit unions serve an entire community. Others serve several employee groups.

How can I locate a credit union that I am eligible to join?
CU Match Up is a user-friendly, web-based service that links individuals or groups with credit unions they may be eligible to join. CU Match Up is easy to use, just complete a series of simple fields such as the city, county, or zip code of where you live, your employer information, religious affiliation, ethnic group or association/organization that you belong to.

Your input is compared to the information contained in the CU Match Up database and a list of matched credit unions will be displayed. You can received detailed information on one or all credit unions listed by clicking on a credit union's name.

The detailed inquiry will provide you with information about the credit union's Web site, e-mail, address, branch location, phone number and fax numbers. For credit unions that have e-mail service, you may request to be contacted by the credit union by e-mail. An information form is provided at the end of the credit union detail screen, just complete the contact information fields provided, and the credit union will contact you.

What are some advantages of joining a credit union?
Because credit unions are democratic, member-owned cooperative, members-like you - have the power to direct credit union policy. Each year, the credit union holds an annual election and meeting, where members select candidates for the Board of Directors, from among their peers, to represent them in setting the policies of the credit union. Credit union elections are based on a one-member, one-vote structure. This structure is unlike the for-profit, public companies where stockholders vote according to the number of shares of stock they own.

Besides the member-ownership advantage, the not-for-profit status of credit unions enables them to operate at a lower cost than many for-profit institutions, and helps them to offer competitive loan and savings rates to you, the member.

What services do credit unions offer?
Credit unions have the ability to offer a wide range of financial services - all to help you meet your financial needs for saving and borrowing.

• Savings and other related services
• Loans
• Convenience Services
• Financial Counseling
• And much more!