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- A credit union is a profit-sharing financial institution, which is democratically run and controlled by its members. Credit unions provide financial services and offer credit to their members. They operate to contribute to international and community development, with some credit unions being volunteer operations. Credit unions around the world vary widely in terms of size, from entities with several members to large unions with thousands of union members and billions of assets. In general, credit unions are smaller than banking establishments, especially in terms of assets.
Three main functions of credit unions can be differentiated. First, they offer union members support and assistance in managing their financial situation, when necessary. Second, they provide low interest loans; and third, they encourage union members to save on a regular basis. In addition to low cost loans, union members enjoy other benefits, including insurance at no direct cost, personalized service, protection through NCUA insurance, and many others. Credit union membership is a convenient and easy way to borrow and save and an excellent source of financial information. On top of low interest rates on loans, some credit unions offer higher interest savings accounts than banks do. Savings are insured against theft and fraud. Truly, credit unions have also faced a rise in delinquencies during the financial crisis. At the same time, they have been less affected. A strong sense of responsibility for the community makes members pay off their loans on time. Union members realize that they will affect other members by not paying off their loans.
In should be noted that unions must be able to function on their own in a competitive market economy. Thus, most credit unions do not accept donations. Another distinctive feature of credit unions is that normally, only members of the union can borrow and deposit money with it. Credit unions market themselves as entities that are committed to their membersí financial wellbeing. To this purpose, they aim to offer excellent member service. They work to provide a broad range of savings and loan products, including share draft accounts, share accounts, online banking, share term certificates, and more. Union members make savings on a regular basis, as much or as little as they want. These savings are pooled together and given out as loans to other union members. Union members, who have made savings over some period of time can apply for a loan. They may be charged just 1 percent a month on the outstanding balance. The income of credit unions is in the form of interest that is charged on loans.
The majority of credit unions offer products and services to individual clients only. Unlike them, corporate credit unions offer various services to credit unions, including service and product delivery, funds clearing tasks, operational support, and others. The largest US credit union of this variety is the U.S. Central Credit Union.
Credit unions that focus on moderate- and low-income communities and people join the National Federation of Community Development Credit Unions, based in New York. It is a national trade association which provides technical assistance, training, education, and investments to community development credit unions across the country.
Credit unions are supported by a variety of groups and institutions. These include community groups, churches, national consumer councils, and others. How to join a credit union? First, you will have to fill out an application form, which can be collected from a collection point. You will need to show some ID. Collection points are located in accessible places and some even work on Saturdays. Some credit unions organize sign up events as well.