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What is a credit union

what is a credit union

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The key difference between a bank and a credit union

is that banks are owned by shareholders, not customers, and are for-profit – which leads to higher fees and rates on loans, since excess profits are returned to shareholders in the form of dividends. Contrast this with a credit union, which returns any excess to members in the form of dividends as an added bonus.

A federal credit union is member-owned and controlled through the election of a board of directors drawn from membership. Board members serve on a volunteer basis; one board member may be compensated.

Federal credit unions have been serving the nation's consumers for 74 years. As of Dec. 31, 2007, there were approximately 8,000 federal credit unions with about $800 billion in assets and serving nearly 90 million people.

Membership in

federal credit unions is not open to the general public. Instead, it is limited to persons sharing a common bond of occupation, community or association. Examples are employees of corporations, members of associations (such as Knights of Columbus) and residents of a defined area (such as a town or a neighborhood).

To join a credit union, a potential member must be first eligible under the common bond provisions, and submit a membership application. Upon submittal of the application, and the purchase of at least one share (typically $5), a person becomes a member with full voting rights.

Many credits unions have a "once a member, always a member" policy, and most also permit members of the immediate family or household of a member to join.

Click on the links below to see fun videos explaining the difference between banks and credit unions -

Category: Credit

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