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What’s a Credit Union?
A credit union is a cooperative,
not-for-profit financial institution
organized to promote thrift and provide
credit to members. It is member-owned and
controlled through a board of directors
elected by the membership. The board serves
on a volunteer basis and may hire a
management team to run the credit union. The
board also establishes and revises policy,
sets dividend and loan rates, and directs
certain operations. The result: members are
provided with a safe, convenient place to
save and borrow at reasonable rates at an
institution which exists to benefit them,
not to make a profit.
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Who owns a credit union?
Most financial institutions are owned by
stockholders, who own a part of the
institution and intend on making money from
their investment. A credit union doesn't
operate in that manner. Rather, each credit
union member owns one "share" of the
organization. The user of credit union
services is also an owner, and is even
entitled to vote on important issues, such
as the election of member representatives to
serve on the board of directors.
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How did credit unions start?
The first credit union cooperatives started
in Germany over a century ago. Today, credit
unions are found everywhere in the world.
The credit union movement started in this
country in Manchester, New Hampshire. There,
the St. Mary's Cooperative Credit
Association, a church-affiliated credit
union, opened its doors in 1909. Today, one
in every three Americans is a credit union
member.
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What is the purpose of a
credit union?
The primary purpose in furthering their goal
of service is to encourage members to save
money. Another purpose is to offer loans to
members. In fact, credit unions have
traditionally made loans to people of
ordinary means. Credit unions can charge
lower rates for loans (as well as pay higher
dividends on savings) because they are
nonprofit cooperatives. Rather than paying
profits to stockholders, credit unions
return earnings to members in the form of
dividends or improved services.
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Are savings deposits insured?
Yes. All savings accounts are insured to at
least $100,000. This exceptional level of
coverage is federal insurance provided
by the National Credit Union Administration
(NCUA - a U.S. Government Agency).
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Who can join a credit union?
A credit union exists to serve a specific
group of people, such as a group of
employees or the members of a professional
or religious group. This is called a "field
of membership." The field of membership may
include where they live, where they work, or
their membership in a social or economic
group.
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