Credit Unions

A credit union is a financial institution that is non-profit, and is owned by its members. Members are selected by a volunteer Board of Directors, and you can only borrow or deposit money with a credit union if you’re a member of the credit union. Credit unions are different from banks and other traditional savings and loan centers in that the members of the credit union are the actual owners and controllers of the institution. Credit unions are co-operative so that policies regarding interest rates, and other finance issues, are created in a way the benefits every member. Credit unions usually pay higher interest rates, or dividends, on shares/deposits, but charge lower interest rates on loans. In order to stay in business credit unions need to have revenues that exceed operating costs – the extra money is used to build capital, and expense loan losses. Banks and credit unions usually offer the same features such as savings and checking accounts, credit cards, and certificates of deposit. Areas of the banking industry that are created for profit conflict with credit unions in that they oppose the tax free structure on earnings that credit unions have. The American Bankers Association is currently trying to revoke the tax free benefits that credit unions have.

In order to qualify as a member of a credit union a client must live, work, or attend school in a defined geographical area. Certain trades people, members of non profit groups, certain occupational groups (like teachers and doctors) all qualify for credit union membership. This is referred to a ‘field of membership’ or a ‘common bond’. Once a member joins they are a member for life, even if their location or occupation changes. However, if a member closes their account, they may not be eligible to re register with a credit union.

Information about statistics worldwide can be found at the World Council of Credit Unions website http://www.woccu.org/. Most credit union members are located in Quebec and in the western prairies. This high membership is due to the fact that trade associations require credit union enrollment, referred to as credit union leagues. In the US there are about 85 million members of credit unions, but usually only one in seven people actually know that they qualify for membership. All statistical information was gleaned from the World Council of Credit Unions website.