In the United States, credit unions are not-for-profit organizations that exist to serve their members rather than to maximize corporate profits. Like banks, credit unions accept deposits, make loans, and provide a wide array of other financial services. But as member-owned institutions, credit unions focus on providing a safe place to save and borrow at reasonable rates. Unlike banks, credit unions return surplus income to their members in the form of dividends.
Favorable Rates and Customer Service
Fees and loan rates at credit unions are generally lower, while deposit dividend and interest rates are generally higher than banks and other for-profit institutions. Credit unions are democratically operated by its members (those joining the credit union), allowing account holders an equal say in how the credit union is operated, regardless of how much they have on deposit at the credit union.
The credit union’s Board of Directors, who are elected by the members, decide who the credit union will serve. In order to join a credit union, potential members must be part of a field of membership, which is typically based on one’s employment, community, or membership in an association or organization. As credit unions serve members of modest means, many will actively expand their field of membership to serve other select groups and/or geographic areas when identified as needing access to affordable financial services. Credit unions designated low-income predominately focus on providing financial services at reasonable rates in areas that are often underserved or unserved by banks.
NCUA Share Insurance Coverage
Federally insured credit unions are insured by the National Share Insurance Fund (NCUSIF). The NCUSIF is operated by the National Credit Union Administration (NCUA), a federal government agency, backed by the full faith and credit of the United States government. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 increased the maximum share insurance coverage at all federally insured credit unions to $250,000. Account balances in excess of $250,000 at a federally insured credit union can be fully insured if properly structured. For additional information on NCUA’s share insurance coverage, see Share Insurance Coverage.