Frequently Asked Questions
Community credit unions, like the ones found on this site, are often considered to be among their neighborhoods’ “best kept secrets.” But that doesn’t mean they have to stay that way. Check out some Frequently Asked Questions and get yourself up to speed with these credit union basics.
What is a credit union?
A credit union is a cooperative, not-for-profit financial institution organized to promote savings and provide credit to members. It is member-owned and controlled through a board of directors elected by the membership. The board serves on a volunteer basis and may hire a management team to run the credit union. The board also establishes and revises policy, sets dividend and loan rates, and directs certain operations. The result: members are provided with a safe, convenient place to save and borrow at reasonable rates at a financial institution which exists to benefit them, not to make a profit.
Who owns a credit union?
Most financial institutions are owned by stockholders, who own a part of the institution and intend on making money from their investment. A credit union doesn’t operate in that manner. Rather, each credit union member owns one “share” of the organization. The user of credit union services is also an owner, and is even entitled to vote on important issues, such as the election of member representatives to serve on the board of directors.
How did credit unions start?
Credit unions got their start in the 1930s as a way for communities to grow and support themselves, in a time when many communities of color and less-affluent neighborhoods were excluded from using banks, mortgage lenders and insurance companies. With the goal of neighbors helping neighbors, the credit union movement grew throughout the Civil Rights era and beyond, as church congregations and community groups across the country began forming these financial cooperatives to serve as community-driven engines of economic opportunity. Today, one in every three Americans is a credit union member.
What is the purpose of a credit union?
Credit unions help make financial services more equitable and democratic because they are non-profit cooperatives, created by and for the members they serve. Because everyone who uses the credit union is a part-owner, credit unions answer to the members themselves, rather than to profit-seeking stockholders. The result is that credit unions offer better rates on loans and make it easier to borrow, even for those with more modest means. Another way credit unions put members first is by encouraging them to build savings — paying higher dividends on savings accounts and offering advice from people who really care about your financial well-being.
Are savings deposits insured?
Savings deposits are federally insured to at least $250,000 by the National Credit Union Administration and are backed by the full faith and credit of the United States Government.