What Is A Credit Union?

What Is A Credit Union?

A credit union is a not-for-profit member-owned financial cooperative offering traditional banking services, including credit cards, loans and checking accounts. A credit union is owned, operated, and controlled by the members who use its services. And because these nonprofit entities aim to serve members rather than maximize profits, members often enjoy reduced fees, affordable loans, and higher savings rates.

The first credit union in the United States was founded in 1909. Since then, this type of financial institution has grown considerably—there are now over 4,800 credit unions with more than 130 million members across the nation. YOUR First Choice Credit Union originated in 1929 and has stood the test of time and endured the many economic changes and challenges of the past century.

When members deposit their money into credit union accounts, they create a communal pool of money used to provide loans to other members. Think of it like a shared piggy bank that funds one member’s loan with another member’s savings.

For example, imagine you deposit $5,000 into a credit union savings account and leave it there for two years. During that time, your $5,000 will accrue interest, and your credit union will lend that money to other members who need loans. When you decide to withdraw your funds, you’ll receive your initial deposit plus the interest accrued. And in the unlikely event that the credit union fails before you make a withdrawal, your deposits are insured up to $250,000 by the National Credit Union Administration (NCUA).

Any income the credit union generates through interest, fees and loans is then used to fund community projects, reinvest into the organization, or provide services that directly benefit members, like paying higher savings interest rates.

Credit unions are usually operated by a board of directors consisting of volunteers elected by the other members. These volunteers are responsible for overseeing the organization and deciding on the credit union’s direction. Credit unions typically hold annual elections, during which the general membership votes to determine who sits on the board of directors.