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What is a Credit Union?

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Credit Unions were originally formed to provide financial services to groups of people such as those who work for the same company. For example, many large corporations have credit unions that provide low interest rates to their employees for credit cards, auto loans, and real estate. By law membership in credit unions is restricted to defined groups of people such as those who work for the same company, attend the same school, are members of the same religion, or people who live in a small geographic area. More information on regulatory compliance can be found at the Credit Union National Association web site.

Credit Unions are non-profit entities that are owned by their members. Members of the credit union are the only ones allowed to deposit or borrow money. Members who deposit money effectively own "shares" in the credit union and are hence part owners. Many credit unions actually refer to each dollar on deposit as one share of ownership in the credit union on their member's monthly statements. Since a credit union is a co-operative entity they pay higher interest rates on deposits and offer lower interest rates on loans to members. The aim of a credit union is not to make a profit but to merely break even. This allows them to offer better rates than a traditional bank.

Check with your employer to see if you can join an affiliated credit union. Or use the CU Match Up site to find a credit union you may be eligible to join.

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