A credit union is a cooperative financial institution that is privately owned and controlled by its members and operated for the purpose of promoting thrift, providing credit at reasonable rates and providing other financial services to its members.
Credit unions differ from other financial institutions in that the members who have accounts in the credit union are the owners of the credit union, and they elect their board of directors in a democratic one person/one vote system regardless of the amount of money invested in the credit union.
All federal credit unions have federal deposit insurance called “share insurance” through the National Credit Union Share Insurance Fund of at least $100,000 per member. This federal deposit insurance is backed by the full faith and credit of the United States government and is administered by the National Credit Union Administration.
Myth: People can’t belong to a credit union unless they work for the right employer, or belong to a union.
Fact: In the late 1990s, state and federal regulators granted “community charter status” allowing credit unions to provide more consumers with affordable financial services.
Myth: Credit unions are essentially like a bank.
Fact: The credit union does provide many of the same services as banks; however, their core values and structure are quite different. Members aren’t customers, they’re owners with an equal vote. The credit union is governed by a volunteer board of directors, whereas a bank has paid directors. Since earned income goes directly to serving the members, the credit union’s dollars stay within the community — an important distinction from customers doing business with regional and international banking conglomerates.
Myth: Credit unions do not pay taxes
Fact: Credit unions do pay taxes, including property, school and employment taxes. Because the credit union is a not-for-profit financial cooperative — returning profits to its members in the form of services, rates and low fees — they’re exempt from federal income taxes. Banks are required to pay corporate income tax because they are in business to maximize profits for their shareholders, not their customers.