Credit union definition

A credit union is a financial cooperative that is owned and controlled by its members. Credit unions provide a safe and convenient way for members to save money and borrow money at reasonable rates.

What is a credit union?

A credit union is a cooperative financial institution that is owned and controlled by its members. Unlike a bank, a credit union does not have shareholders. Its profits are returned to its members in the form of lower loan rates, higher savings dividends, and lower fees. Credit unions are not-for-profit organizations that exist to serve their members.

Credit union membership is open to anyone who meets the membership criteria of the specific credit union. Most credit unions have community charter membership, which means anyone who lives, works, worships, or attends school in the credit union’s defined geographic area can join. There are also labor-based, employer-based, and faith-based credit unions.

History of credit unions

A credit union is a not-for-profit financial cooperative owned and controlled by its members. Members pool their savings in a common fund from which they can borrow at low-interest rates. Credit unions offer many of the same services as banks, but they are operated for the benefit of their members, not for profit.

The first credit union was founded in 1852 in Rochdale, England. The Rochdale Pioneers set up a cooperative store that sold only to members, who paid weekly dues. In 1864, Friedrich Wilhelm Raiffeisen founded the first rural credit union in Germany. In 1909, Edward Filene, a Boston merchant, established the first U.S. credit union.

Today, there are more than 54,000 credit unions serving over 217 million members worldwide. In the United States alone, there are over 5500 credit unions with more than 100 million members.

How do credit unions operate?

Credit unions are owned and operated by their members, who are also their customers. This means that credit unions are not-for-profit institutions; they exist to serve their members, not to make a profit for shareholders. Because of this structure, credit unions are able to offer higher interest rates on savings accounts and lower interest rates on loans than for-profit banks.

In order to become a member of a credit union, you must first meet the eligibility requirements set forth by that particular institution. Generally speaking, you must live or work in the same community as the credit union, or be related to someone who does. Once you become a member, you’ll be required to maintain a minimum balance in your account and to pay annual dues.

What are the benefits of credit unions?

There are a number of benefits that credit unions offer their members. These include:

• More personalized service: Credit unions are typically smaller than banks, which allows them to offer a more personalized level of service. In some cases this can mean a loan without a traditional credit check.
• Lower fees: Credit unions often charge lower fees for services such as ATM usage and account maintenance.
• Higher interest rates on deposits: Credit unions typically offer higher interest rates on deposits than banks.
• Lower interest rates on loans: Credit unions also tend to offer lower interest rates on loans than banks.
• Processing time might be faster. If you have been a member for a long time, the timefrom application to paid out loan might be faster than usual.

Are there any drawbacks to credit unions?

There are a few potential drawbacks of credit unions to consider:

• Lack of branches and ATMs: Because credit unions are often regional or local, they can have fewer branches and ATMs than larger banks. This can make it difficult to access your account if you’re traveling.
• Limited services: Credit unions may not offer all the same services as larger banks. For example, they may not have investment divisions or a full range of lending products.
• Membership requirements: In order to join a credit union, you often have to meet certain requirements, such as being employed by a certain company or living in a certain area.