Non-profit financial organizations built to serve you
Despite having their membership including millions of Americans, many are still not conversant with what credit unions really are.
Quick Guide
Credit unions represent non-profit financial cooperatives that cater to member groups that share some link such as working for a certain company, part of an association, or residing in a specific geographic region. Credit unions that can serve anyone living or working within a particular geographic region are known as local credit unions. A credit union that caters to employee groups or associations is often referred to as a SEG-based (select employee group) or a sponsor-based credit union.
Over 82 million U.S. consumers are members and obtain all or part of their financial services from one out of the 10,425 total credit unions across the nation. Given their non-profit cooperative nature, credit unions generally provide more attractive savings and loan rates in addition to low or no charges. Various surveys rank credit unions at the top among financial institutions in terms of customer satisfaction.
Principles and Organization
Professionals at dccu.us clarified that credit unions operate as democratically owned and controlled foundations, abiding by people-helping-people principles. The board of directors of a credit union are elected by its members and every member gets an equal vote irrespective of their deposit amount. This is not the case with mutual banks where the amount deposited determines the number of votes or publicly-held banks where the number of stock shares determine this.
Only members are allowed to serve as directors. These positions are voluntary and unpaid, catering to the interests of fellow members utilizing the credit union’s services. This differs from other financial institutions where board members receive compensation and work in the interest of external owners. Volunteers are a vital resource for credit unions. Currently, over 129,000 Americans voluntarily work for their credit unions as board members, committee members, or offering other support. Credit unions are devoid of external shareholders, hence profits, after reserves have been allocated, are returned to members as savings dividends, lower loan rates or additional services.
Managed Wisely and Covered by Federal Insurance
Credit unions primarily issue consumer loans and to a smaller extent, business and residential real estate loans to their members.
Deposits at federally-chartered and virtually all state-chartered credit unions are federally insured by the National Credit Union Share Insurance Fund, managed by the National Credit Union Administration (NCUA). This fund is guaranteed by the full faith and credit of the U.S. Government. It functions like other insurance funds, such as the FDIC coverage for banks, in that the NCUSIF assures member deposits up to $250,000.
Regulation and Oversight
The NCUA, an independent federal agency, regulates federally chartered credit unions. State credit union departments oversee state chartered credit unions. Credit unions fund the NCUA’s regulatory activities, hence no public money is used. Credit unions must also comply with laws and rules enforced by other entities such as the Federal Reserve, Internal Revenue Service, Federal Trade Commission, Department of Justice, Department of Labor, among other federal and state agencies.
Taxation
As credit unions are member-owned, democratically run, and non-profit, they are exempt from federal income taxes, a concession extended by the federal government. Most states have also waived state income and most sales taxes for credit unions. However, credit unions are required to pay payroll taxes, property taxes, and some sales taxes. Also, credit union members are taxed on their credit union dividends.
