Credit Unions as we know them have been around since at least the mid 1800s, yet to some they remain complete mysteries.
So what IS a credit union?
1. Credit Unions (CUs) are member-owned financial cooperatives.
One of the most commonly used ways to describe a credit union is also one of the best things about them—they are owned by their members! Becoming a member of a credit union makes you one of its owners. This means you get a say in how your CU is run and that you’re keeping your funds with a trusted institution that not only provides the same (or better) service as a bank, but also one that you are part owner of.
2. Credit Unions provide credit at competitive rates, as well as other financial services for their members.
This one can get a bit complicated. Credit Unions are owned by their members, right? So how can the CU serve their owners best? By providing competitive financial services that enable members to achieve their goals. This can include credit, car loans, home loans, savings accounts, and much more. The deposits that are placed in a CU by one member directly enable the CU to loan money and to provide credit to another member. Funds placed in a CU are also insured up to $250,000 by the NCUA, so you know your funds are safe.
3. Credit Unions were formed by communities.
Community. Everyone is a part of some community in one way or another, including your CU. The difference is that CUs were started by their communities to serve their communities. Did you know that CUs often donate funds or provide sponsorships to local non-profit organizations? Did you also know that they are not required to do so by any regulatory body? Part of CU culture lies in the dedication to the economic, social, and educational success of the community that makes up its membership.
4. Credit Unions are not-for-profit organizations. They exist to serve their members rather than to maximize profits.
Profits (and more importantly, what is done with profits) are one of the most important factors to any business. CUs are not-for-profit businesses, but profit can still be made from various products and services. Since no single person owns a CU, where do those profits end up? Aside from operating costs, CU profits end up going back to every single member-owner. This usually happens in the form of lower interest rates and higher dividends, but every CU is different. It often takes a village to run a CU, and the pay for CU employees is not counted into the calculations of profit. CU employees are some of the most proud and dedicated CU member-owners around so we strive to keep operating costs low to maximize the return to our members.
5. Members elect the volunteer board of directors. Each member gets one vote, no matter how much money they have placed in the credit union.
Do you know who runs your financial institution? At a bank, shareholders call the shots (and receive the profits.) At a CU, members run the show, but with so many members who makes the ultimate decisions on behalf of the majority? A volunteer board of directors! And how do we decide on who sits on the board of directors? In the spirit of a CU, we choose democratically. Each member gets one vote for who should make decisions on their behalf. This truly puts the power in the hands of members.
Bottom line, credit unions are diverse organizations, more connected to their communities than a bank and just as capable. We invite you to join the credit union movement with us. Experience TwinStar, and all the benefits of being our member.
Article written by Austin Lang, Marketing Assistant, TwinStar Credit Union