What is a credit union?
Simply put, a credit union is a not-for-profit financial institution that exists to serve its members. Credit unions provide products and services to people who share something in common, such as where they work or live, or even their nationality.
When a person joins a credit union, they are considered a member because they are one of the owners and shareholders of the institution. The democratic nature of credit unions allows all members to have an equal voice in the operation of the organization regardless of the amount of money each person has on deposit.
Credit unions exist to serve members, not profit from them. All of a credit union’s profits are returned to members in the form of fewer fees, lower rates on loans and higher rates on savings. Credit union membership offers numerous benefits, including access to a variety of services like simple savings, home equity loans, IRAs and more.
Just as banks have FDIC insurance, money at the credit union is also backed by the full faith and credit of the federal government. The National Credit Union Share Insurance Fund (NCUSIF) insures a member’s shares on deposit at a credit union up to a minimum of $250,000.
What is the difference between credit unions and banks?
While consumers may think that credit unions look like banks from the outside, they are very different on the inside. Credit unions and banks typically offer similar products and services, which can frequently lead to confusion. Review the chart below to discover the differences between banks and credit unions.
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Credit Unions
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Banks
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Not-for-profit cooperatives
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For-profit organizations
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Credit unions return earnings to members in the form of lower loan rates, higher savings rates, and free or low-cost services.
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Banks returns profits to shareholders.
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Each person who deposits money into the credit union is a member with a share of ownership.
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Customers have no ownership in the corporation.
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Credit unions are controlled by Board of Directors elected by members.
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Banks are controlled by stockholders who elect the Board of Directors.
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Most credit union board members are volunteers.
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Bank board members are generally paid for their service.
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Credit unions are only allowed to serve a select group of individuals that have a common bond such as where they work, live or even their religion.
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Banks can serve anyone in the general public.
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How does everyone benefit from credit unions?
Credit unions provide numerous benefits to not only their members but also to consumers and communities. Keep reading to discover how credit unions make a difference in the lives of all Minnesotans.
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Credit unions benefits to members
Minnesota credit union members save approximately $2.1 million a year by using a credit union rather than a bank.
This savings works out to about $140 per a member and $266 per household. Credit unions are able to offer these savings because they exist to serve members not profit from them. The profits a credit union makes are returned to members in the form of lower fees, better rates on loans and more services. (CUNA Research & Statistics)
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Credit union benefits to consumers
Credit unions create competition in the financial services industry. When financial institutions are forced to compete with one another, they must work hard to provide quality services at competitive rates.
It is the top priority for credit unions to improve services for members, not to increase profits for stockholders. When credit unions provide exceptional service to members, they raise the bar for other financial institutions. Ultimately all consumers benefit.
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Credit unions benefits to communities
Credit unions have a history of giving back to the communities they serve. Credit unions have repeatedly proved that their philosophy of “people helping people” is an everyday way of doing business.
All around the state credit unions are working to provide communities the services and resources they need. Through involvement in Toys for Tots, Habitat for Humanity, and other community organizations, credit unions are actively demonstrating what it means to be a corporate citizen.
Credit unions are also actively involved in reaching out to underserved areas and providing services to those who are not traditionally served by financial institutions. By teaching citizens how to properly build, maintain and use credit wisely, credit unions are giving them the tools they need to achieve financial success and further contribute to the Minnesota economy.
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