What is a Credit Union

Credit unions are not for profit cooperative associations that offer a variety of personal financial services exclusively to their members. People who join a credit union do so because of a “common bond”, such as a place of employment, an organization, or a church group.

Credit unions are not a new concept. Their origins go back to mid-19th century Europe. At that time, a group of local farmers pooled their resources to purchase supplies at a lower cost. They also agreed to place their excess earnings during periods of good harvest in a common account. In return, participants could then borrow from the “common account” at a lower interest rates during periods of poor harvest.

In the early 1900’s, the credit union concept of “people helping people” was introduced into the United States by Edward Filene, a Boston Merchant. The first U.S. credit union, St. Mary’s Cooperative Credit Association, was established in 1909 in New Hampshire and is still in operation. Today there are over 12,000 credit unions in the U.S. servicing the financial needs of over 67 million members. Unlike other types of financial institutions that must generate a profit for stockholders, credit unions are member-owned , not-for-profit, cooperative financial organizations. As such, excess earnings are returned to the members, primarily in the following returns:

  • Competitive dividend rates paid on savings and investment accounts.
  • Competitive interest rates on loans.
  • The addition of new product and services.

The products and services offered and the methods used to conduct business have changed over the years. Credit unions now take advantage of today’s technology to meet the ever-changing needs of members. However, the basic philosophy envisioned by our founding fathers has not changed – that of “people helping people.”


The financial problems facing the banking and savings and loan industries are well documented. Media reports about the challenges they face and the pressures on their deposit insurance fund have become part of our daily lives. At the same time, credit unions have grown in financial strength. Our insurance fund, the NCUSIF (National Credit Union Share Insurance Fund) is sound and is the strongest of all the federal deposit insurance funds. Established by Congress in 1970, this fund is managed by the NCUA (National Credit Union Administration) and insures member deposits for up to $100,000. Currently, the NCUSIF has about 5 times more dollars in reserve for every $100.00 on deposit than the Bank Insurance Fund.

THE MANAGEMENT DIFFERENCE: The strength of the credit union deposit insurance fund represents only one of the reasons why credit unions have remained stable. The other is the manner in which they are managed. Unlike other financial institutions, a credit union’s Board OF Directors is comprised of volunteers elected by and from the membership on annual basis. When establishing policy for the credit union, their only objective is to provide the type of leadership that represents the best interest of the total membership. The decisions they make are not influenced by either personal gain or generating a profit for stockholders.

In addition, other people donate their time to serve the credit union in various capacities. For example, volunteers are responsible for the examination of financial records and the verification of accounts. In total, over 250,000 credit union members in the U.S. devote their time, expertise, and efforts to manage and protect the financial stability of the credit union concept. This volunteer leadership represents one of the most significant differences between credit unions and other financial institutions.

THE LOGICAL CHOICE: Clearly, if you are concerned about the safety and availability of your money, credit unions represent the most logical choice as a source to satisfy your individual financial needs.

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