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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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Are savings deposits insured?
Yes. All savings accounts are insured up to $100,000 by the NCUA,
the National Credit Union Administration, an agency of the
federal government.
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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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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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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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