Consumers who are feeling the chilly winds of current economic conditions need to know they have options when it comes to financial institutions. One such institution, which almost everyone has heard of, is the credit union.
But if you've never been a member of one you may find yourself wondering just exactly what a credit union is. The name can be off-putting. Do they just deal in credit? Are they some sort of union like truck drivers or aviation workers belong to? Some may have driven by credit union branches for years without ever really knowing what goes on there. The Better Business Bureau offers the following information about credit unions for the uninitiated.
Put simply, credit unions are institutions through which members pool their savings and lend to each other. CUNA, the Credit Union National Association, describes a credit union as "a cooperative financial institution, owned and controlled by the people who use its services." Anyone who holds an account is considered a member and as such, part owner. CUNA goes on to say that credit unions are "not-for-profit, and exist to provide a safe, convenient place for members to save money and to get loans at reasonable rates."
Every member of a credit union, whether they have miniscule or huge amounts in their accounts, has equal ownership and one vote. Those members elect unpaid and voluntary directors from among themselves to govern the credit union. CUNA refers to this as "economic democracy."
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Because they are run as not-for-profit institutions, credit unions can deliver relatively high rates for their depositors. The profits are returned to the customer/members in the form of better rates and lower transaction fees. In addition to higher money market account yields, at the end of the year some credit unions actually reward their members with cash bonuses for meeting financial targets.
In terms of services for their members, credit unions offer savings and checking accounts, though they call them "share accounts" and "share draft accounts." The terminology is all that differs between these accounts and the more traditionally named savings and checking accounts. One issue that might matter to some: At most credit unions, canceled checks are not returned to members. The obvious way around that is by keeping a carbon copy of the checks you write. Of course, for many in this digital age, check writing rarely happens.
Credit unions are known for their lower interest rates on loans. Many even offer a "signature loan" which is an unsecured loan guaranteed only by your signature, to members with good credit.
Branch locations may be a bit more limited for credit unions and that might be an issue one would need to check out before joining. Credit unions are online, off course, and location maps can be found on their websites. Online banking is offered by nearly every credit union.
In the U.S. today there are nearly 94 million members who own more than 7,400 credit unions. Depositors are federally insured. The National Credit Union Administration, an agency of the federal government, insures every credit union member for $250,000 for their individual accounts.
Additionally, an important part of the mission of credit unions is financial education. They frequently offer seminars on such topics as basic budgeting, fraud prevention, buying a car or buying a home.
Qualifying for membership in a credit union is easy. Laws require them to have a defined group of members but the necessary qualifications can be very broad. In many cases it is a geographic distinction. Anyone living in a particular city or county can be a member.
The National Federal Credit Union Association has a search program to help anyone locate a credit union nearby. Find it at culookup.com.
Feel free to contact the Better Business Bureau with any questions about credit unions.