What is a Credit Union
A credit union is a member-owned cooperative, not-for-profit financial institution organized to provide deposit accounts, loans, and other financial products to its members (who are also its customers). Federally-insured credit union members are provided with a safe, convenient place to save and borrow at reasonable rates, with savings insured up to $250,000 by the National Credit Union Share Insurance Fund (NCUSIF). Certain retirement accounts are insured to $250,000. Learn more about what it means to be an NCUA insured credit union.
The key difference between a bank and a credit union
Banks are owned by shareholders, not customers, and are for-profit – which leads to higher fees and rates on loans, since excess profits are returned to shareholders in the form of dividends. Contrast this with a credit union, which returns any excess to members in the form of dividends as an added bonus.
A federally-insured credit union is member-owned and controlled through the election of a board of directors drawn from membership. Board members serve on a volunteer basis; one board member may be compensated.
Membership in federally-insured credit unions is not open to the general public. Instead, it is limited to persons sharing a common bond of occupation, community or association. Examples are employees of corporations, members of associations and residents of a defined area (such as a town or a neighborhood).
To join a credit union, a potential member must be first eligible under the common bond provisions, and submit a membership application. Upon submission of the application, and the purchase of at least one share (typically $5), a person becomes a member with full voting rights.
Many credit unions have a "once a member, always a member" policy, and most also permit members of the immediate family or household of a member to join.