Credit union

A credit union is a co-operative financial institution that is owned and controlled by its members, generally through the election of a Board of Directors. Only a member of a credit union may deposit money with the credit union, or borrow money from it. The character of a borrower is often deemed to be the most important factor in deciding whether or not to make a loan.

A credit union differs from a traditional bank in that the members who have accounts in the credit union are its owners. (Mutual savings banks are owned by members.) Since a credit union is a co-operative institution, its policies governing interest rates and other matters are set to benefit the interests of the membership as a whole; for example, credit unions often pay higher interest on deposits and charge lower interest on loans. Credit union revenues (from loans and investments) do, however, need to exceed operating expenses and dividends (interest paid on deposits) in order to remain in business.

Credit unions offer many of the same financial services as banks, including share accounts (savings accounts), share draft (checking) accounts, credit cards, and certificates of deposit.

Regulatory agencies require that credit unions restrict their membership to defined segments of the population, such as people who live, work, worship, or attend school in a well-defined geographic area, employees of specific companies, members of specific non-profit groups (alumni associations, conservation or other advocacy organizations, lodges, churches, etc.) or a particular occupational group (teachers, doctors, etc.) In the US, this is referred to as the credit union's field of membership.

Mergers of smaller credit unions with disparate membership bases often result in a credit union with a wide variety of ways to qualify to join, thus a credit union may have a much broader field of membership than the credit union name would imply. Once you are a member, you can remain a member even if you move, change employers, etc.

Canada is the country with the highest per capita use of credit unions, with over a third of the population enrolled in one. They are concentrated in Quebec, where they are known as caisses populaires, and on the Western prairies.

The United States has nearly 85 million credit union members.

As of the end of 2004, the National Credit Union Administration (NCUA ( insured more than $500 billion in deposits at 9,000 nonprofit cooperative US credit unions. The Federal Deposit Insurance Corporation (FDIC ( insured more than $3,000 billion in deposits at 8,900 banks and thrift institutions. The NCUA and the FDIC are both independent federal agencies backed by the full faith and credit of the US government.

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