What is a Credit Union?
Quick Definition of Credit Union:
Cooperative financial institution that is owned by
its members and does not have stockholders. Because a credit
union is not-for-profit, it returns earnings to members in
the form of more competitive rates of return on accounts and
loans, lower fees and improved services.
Credit unions offer many of the same services you’d
expect from any financial institution, such as savings and
checking accounts, debit and credit cards, vehicle and mortgage
loans, college loans, IRAs and more. Deposits in credit unions
are fully insured up to $100,000 by the National Credit Union
Share Insurance Fund – similar to banks’ FDIC
insurance, except credit unions’ system is funded by
credit unions instead of taxpayers.
Credit union services can cost hundreds of dollars per year
less than other financials due to how credit unions are structured
and owned; credit unions do not have highly paid stockholder-owners
expecting to earn hefty profits. Instead, credit unions have
volunteer (unpaid) boards elected by the membership to look
after members’ best interests. They are not-for-profit;
meaning they return earnings to depositors (members) in the
form of more competitive rates of return on accounts and loans,
lower fees and improved services. The affordable services
offered by credit unions ensure competition for financial
services, which benefits all consumers.
Local Ownership and Control
Credit unions are owned and organized as cooperatives. For
example, a cooperative grocery store allows people to pool
their purchasing power to buy goods at more competitive rates.
Credit unions are much the same – think of it as depositors
pooling funds to save and lend to one another at more reasonable
rates. Each deposit in a credit union (no matter how big or
small) is an ownership share (checking accounts are called
"share draft" accounts).
Because credit unions are member-owned, each depositor has
one vote and can participate in annual meetings that affect
how the credit union is run. This democratic control benefits
the communities the credit unions are in. As bank mega-mergers
put the fee-squeeze on consumers and push decisions about
lending away from local communities, democratically controlled
credit unions keep service levels high and decisions about
service close to home.
The Credit Union Difference
Because credit unions exist not for profit but to serve their
members, credit unions behave in ways banks don’t. For
example, credit unions make small loans to consumers that
many financials would consider “unprofitable”
– loans for $1,000, $500, or even less. They’ll
also open savings accounts for smaller amounts, and generally
look for ways to avoid imposing fees. Because they aren’t
focused on profit-making, credit unions also spend time with
members to encourage savings and financial responsibility.
Many offer consumer education and referrals for debt counseling
to help members experiencing financial problems.
How To Join
Many credit unions are open to the community – unlike
years ago when credit unions were chiefly made up of employees
of sponsoring companies – thanks to recent changes in
federal law affecting credit union membership. Currently,
nearly two million Wisconsin residents belong to almost 300
credit unions, of which more than a third are open to the