During this worldwide financial recession, people are looking for ways to save money wherever possible. Credit unions offer a number of financial benefits to their members. Take this quiz to see if you know how credit unions operate and how they are different from banks.
Banks collect interest from loans they make and also charge account fees. They typically invest those funds to make even greater profits.
Credit unions are typically owned by their account holders and pay no taxes due to their non-profit status.
As a not-for-profit corporation, a credit union is not allowed to keep its profits. It will either use the profits to improve the institution itself or pay them to members as dividends.
Since they do not try to maximize profits, credit unions can afford to lend money at lower interest rates than banks can.
Already sharing one common bond, these people realized they could also all benefit by cooperatively owning their financial institutions.
Of 172 million members worldwide, about 90 million Americans belong to credit unions. There are more than 46,000 such institutions around the world.
Because credit unions can offer lower interest rates on loans, banks feel unable to compete with these organizations.
Though the cooperative movement in general began in Rochdale, England, in 1844, the first to apply the movement's concepts to finance were the Germans.
The urban poor were easily preyed upon by loan sharks. Credit unions pooled members' money to offer safe credit to those in need.
Massachusetts was the first state to establish laws for credit unions, but the first U.S. credit union was in Manchester, NH.
As part of Roosevelt's New Deal plan to fight the problems of the Great Depression, the Federal Credit Union Act created a network of credit unions that was overseen by the government.
The Credit Union National Association (CUNA) was established to oversee all the credit union leagues around the United States. The other two organizations were both established in 1970.
The number of U.S. credit unions grew steadily for many years, but in the past few decades, many have merged with each other, reducing the overall number.
The banking industry won their case in the U.S. Supreme Court when it was determined that some credit unions were illegally attempting to increase their market share.
A small credit union needs a corporate credit union to supply it with enough cash to operate normally.
Though the term seems to imply they operate for profit, they are still non-profit entities. They are called corporate credit unions since they are larger and serve the smaller credit unions.
Just as corporate credit unions serve natural-person credit unions, U.S. Central serves the large corporate credit unions.
To take advantage of the benefits that a credit union offers, you must share an employer, religious institution, branch of the military or some other bond with the other members.
This rate is nearly three points below the interest rate for the average bank credit card and is one of the main benefits that credit union members enjoy.
Though most credit unions today offer services that are comparable with larger banks, their smaller size sometimes affects the availability of these services.