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Credit Union

A credit union is a cooperative financial institution that is owned and controlled by its members, and operated for the purpose of promoting thrift, providing credit at reasonable rates, and providing other financial services to its members. A credit union is a not-for-profit co-operative financial institution that is owned and controlled by its members. Only a member of a credit union may deposit money with the credit union, or borrow money from it, in the form of a residential mortgage loan, or auto loan etc.

A credit union differs from a traditional financial institution (banks etc.) in that the members who have accounts in the credit union are technically the credit unions owners. Credit union revenues (from loans and investments) do, however, need to exceed operating expenses and dividends (interest paid on deposits) in order to remain in business.

Credit unions offer many of the same financial services as banks, including share accounts (savings accounts), share draft (checking) accounts, credit cards, share term certificates (certificates of deposit), and loans as mentioned above.

Credit Union Advantages

The advantages of securing your home loan through a credit union as opposed to a bank, are that credit unions typically will offer discounted rats for PMI, lower closing costs, competitive rates, and time saving features like having your monthly mortgage payment automatically deducted from your account. Credit Unions also typically offer special programs for first time home buyers

Some of the top Credit Unions include: Watermark Credit Union, Veridian Credit Union, Onpoint Credit Union, IQ Credit Union, Elevations Credit Union, Altura Credit Union, Advantis Credit Union, TVA Credit Union, Keypoint Credit Union, Founders Federal Credit Union, Empire Federal Credit Union, Velocity Credit Union, Vantage Credit Union, United Credit Union, Truliant Credit Union, Suncoast Credit Union, Scott Credit Union, Provident Credit Union, North Island Credit Union.

Differences from other financial institutions

Credit unions differ from banks and other financial institutions in that the members who have accounts in the credit union are the owners of the credit union and they elect their board of directors in a democratic one-person-one-vote system regardless of the amount of money invested in the credit union.

A credit union's policies governing interest rates and other matters are set by a volunteer Board of Directors elected by and from the membership itself. Credit unions offer many of the same financial services as banks, often using a different terminology; common services include: share accounts (savings accounts), share draft (checking) accounts, credit cards, share term certificates (certificates of deposit), and online banking. Normally, only a member of a credit union may deposit money with the credit union, or borrow money from it.

As such, credit unions have historically marketed themselves as providing superior member service and being committed to helping members improve their financial health. In the microfinance context, credit unions provide a broader range of loan and savings products at a much cheaper cost to their members than do most microfinance institutions.

More information on Credit Unions

Many credit unions exist to further community development or sustainable international development on a local level. Worldwide, credit union systems vary significantly in terms of total system assets and average institution asset size, ranging from volunteer operations with a handful of members to institutions with several billion dollars in assets and hundreds of thousands of members. Yet credit unions are typically smaller than banks; for example, the average U.S. credit union has $93 million in assets, while the average U.S. bank has $1.53 billion, as of 2007.

The World Council of Credit Unions (WOCCU) defines credit unions as "not-for-profit cooperative institutions". In practice however, legal arrangements vary by jurisdiction. For example in Canada credit unions are regulated as for-profit institutions, and view their mandate as earning a reasonable profit to enhance services to members and ensure stable growth. This difference in viewpoints reflects credit unions' unusual organizational structure, which attempts to solve the principal-agent problem by ensuring that the owners and the users of the institution are the same people. In any case, credit unions generally cannot accept donations and must be able to prosper in a competitive market economy.