Glossary term
Credit Union
A credit union is a member-owned, not-for-profit financial cooperative that offers services such as deposit accounts, loans, and payments.
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What Is a Credit Union?
A credit union is a member-owned, not-for-profit financial cooperative. It can offer deposit accounts, loans, payment services, credit cards, and other financial products to people who qualify for membership.
Credit unions are different from banks in ownership structure. A bank is generally owned by shareholders. A credit union is owned by its members, and member deposits are often called shares because they represent ownership in the cooperative.
Key Takeaways
- A credit union is a member-owned financial cooperative.
- Membership is usually based on a field of membership, such as employer, location, association, or family connection.
- Federally insured credit union deposits are insured by the National Credit Union Share Insurance Fund.
- Credit unions may offer checking, savings, loans, cards, and other financial services.
- Rates and fees can be attractive, but consumers should still compare terms.
How Credit Unions Work
A credit union serves its members rather than outside shareholders. Members may be able to vote for the board of directors and participate in governance. The institution still must manage risk, earn enough to operate, and comply with regulation, but its cooperative structure can influence pricing, service model, and member benefits.
Federal credit unions are chartered and supervised by the National Credit Union Administration. Many state-chartered credit unions are also federally insured. Deposit insurance is important because it protects eligible member deposits up to applicable limits if the institution fails.
Credit Union Versus Bank
Feature | Credit union | Bank |
|---|---|---|
Ownership | Member-owned cooperative | Often shareholder-owned |
Eligibility | Requires membership qualification | Generally open to customers |
Deposit insurance | NCUSIF for federally insured credit unions | FDIC for insured banks |
Product comparison | May offer favorable rates or fees | May offer broader scale or branch networks |
What to Compare Before Joining
Membership alone does not guarantee the best deal. Consumers should compare interest rates, account fees, ATM access, digital banking, loan terms, deposit insurance status, customer service, and any membership requirements. A credit union may be excellent for one product and less competitive for another.
Borrowers should also compare loan APR, repayment term, fees, prepayment rules, and underwriting requirements. The cooperative structure is useful context, but the contract still determines the financial result.
The Bottom Line
A credit union is a member-owned financial cooperative that provides banking and lending services. It can be a strong option for deposits and loans, but members should still compare insurance coverage, fees, rates, access, and product terms.