What should I know about credit unions?

What to know about credit unions

Although they were created in Germany, first in 1852, and then popularized in 1864, credit unions are wonderful examples of “Americana.” They are cooperative institutions, with every customer (or member) having ownership. Unlike stockholder-based commercial banks, every member has one vote, regardless of how large or small their accounts may be.

This allows every member to have a voice in how his or her institution is focused. Ironically, the first U.S. credit union is named St. Mary’s Bank Credit Union (Manchester, N.H.). Established in 1908, it continues to prosper today.

All accounts in credit unions are insured up to $100,000 by the National Credit Union Administration (NCUA), just as banks are insured by the FDIC (Federal Deposit Insurance Corporation). Each insurance provider has their own separate fund to protect depositors’ accounts.

Along with a purely democratic system (one-person = one-vote), credit unions distribute most of their profit to their members in the form of dividends and/or interest rebates. They have historically enjoyed a federal income tax exemption because of this philosophy.

In recent years, as credit unions have become larger and more technologically sophisticated, the distribution of profits to members has been typically applied to paying higher interest on savings accounts and keeping loan rates as low as possible.

With more than 45,000 credit unions in around 100 countries, these member-owned institutions can be small entities whose membership embraces only a few hundred people or state-of-the-art financial centers with assets in excess of a billion dollars. Credit unions are typically excellent choices for your primary financial institution, offering you all the products and services of a mega bank, while you still enjoy the privileges of ownership.