What is a credit union?
A credit union is a member-owned, not-for-profit financial institution governed by a volunteer board of directors. Credit unions provide savings, checking, loan and other financial services to their members. Most credit unions serve a specific group of people who share something in common, such as where they live, work, worship or go to school.
History of credit unions
The concept of the credit union began in 19th-century Germany with the establishment of the first “people’s bank” in 1864. The idea quickly spread to other countries, including Canada, where the first credit union was founded in 1901. In the United States, credit unions were started by individuals who were members of religious or ethnic groups that were underserved by banks. The first U.S. credit union was founded in Manchester, New Hampshire in 1908.
The worldwide credit union movement has grown rapidly since its inception. There are now more than 57,000 credit unions serving 235 million people in 105 countries. In the United States, there are over 6,000 credit unions serving more than 100 million people.
How do credit unions work?
Credit unions differ from banks in several ways. For one, credit unions are not-for-profit organizations, while banks are for-profit. This means that credit unions do not have shareholders, and their profits are returned to the members in the form of better rates and lower fees.
Another difference is that credit unions are governed by a board of directors who are elected by the membership, while banks are governed by a board of directors or shareholders who may or may not be customers of the bank.
Finally, credit unions typically serve a specific group of people who have something in common, such as where they live, work, worship, or go to school. Banks, on the other hand, serve anyone who wants to do business with them.Similar reading: about Credit score.
Advantages of credit unions
Credit unions offer a number of advantages over other financial institutions, including banks. Credit unions often have lower fees than banks.
In addition, credit unions typically have a local focus and can offer a more personalized level of service. Credit unions are also often more willing to work with members who have financial difficulties.
Disadvantages of credit unions
Though credit unions boast many advantages over banks, there are a few disadvantages worth considering.
The biggest disadvantage of credit unions is likely their smaller size and limited branches. This can make it difficult to find a credit union with branches near you, which can be an issue if you frequently travel or live in a rural area. Additionally, because credit unions are so localized, it’s common for them to lack the comprehensive online and mobile banking features that many banks now offer.
Another downside to consider is that credit unions typically have stricter membership requirements than banks. To join a credit union, you’ll often need to meet certain criteria like living or working in a certain area, being affiliated with a certain organization, or belonging to a specific profession. These requirements can make it harder for some people to qualify for membership.
Finally, keep in mind that credit unions typically offer fewer investment options than banks. So if you’re looking for a one-stop shop for all your financial needs, a bank may be a better option.
Are credit unions safe?
Credit unions offer many of the same services as banks, but they are often considered to be a safer option because they are not-for-profit organizations. This means that credit unions do not have to answer to shareholders and their primary goal is to serve their members.
Credit unions are regulated by the National Credit Union Administration (NCUA), which is an independent federal agency. The NCUA insures deposits at credit unions in the event of a failure, up to $250,000 per account. This insurance is backed by the full faith and credit of the U.S. government, making credit union deposits just as safe as those made at a bank.
How to join a credit union
Joining a credit union is easy and can be done in a few steps.
1. Research credit unions in your area. Not all credit unions are open to everyone, so you will want to find one you are eligible to join. There are many ways to research credit unions, including online, in the phone book, and by word-of-mouth.
2. Once you have found a few credit unions that you may be eligible to join, compare their rates and fees. Credit unions offer many of the same products and services as banks, but their rates and fees are often much lower.
3. Choose the credit union that is right for you and complete a membership application. Most credit unions require that you open a savings account before you can apply for a loan or other services.
4. Start using your credit union’s products and services!