A credit union is defined as a "financial institution formed by an organized group of people sharing a common bond."

Isn't that what everybody wants from a banking relationship? 

FIRST, SOME BACKGROUND. Credit unions were formed as a means of providing credit to individuals to purchase items such as livestock, equipment and even bread at a substantially lower interest rate than was being charged at other banking or lending institutions. These "cooperatives" were not out to make a profit, but rather to serve the needs of their members. Over the years, credit unions have formed to service industries, corporations, communities and churches. They provide financial services that mirror a bank, but are generally smaller, more personal financial institutions. Credit unions serve a specific membership (often within a defined geographic area) and cater to their specific needs. 

Credit unions have grown over the last century and have become highly competitive with banks. So it's not surprising that they look quite similar.  


  • Credit unions offer checking and savings accounts, just like banks. 
  • Credit unions offer installment loans, mortgages, and credit cards, again, just like banks. 
  • And credit unions are federally insured up to the same dollar amount as banks ($250,000). While you may know banks as being FDIC insured, the equivalent for credit unions is known as NCUA insured (National Credit Union Administration). Both are backed by the United States government. This means that the only difference between the two is the type of institution they insure, not the reliability of that insurance.

The differences are what distinguish credit unions from banks -- and it's often an eye-opening discovery for many people unfamiliar with credit unions.


  • When you join a credit union, you're no longer simply a customer, but a member and joint owner of the credit union.
  • As a member, individuals have the right to vote as well as run for the Board of Directors.
  • Credit unions are not-for-profit organizations. Banks on the other hand are for-profit organizations using their resources to maximize their earnings (often at the expense of the customer),
  • As a not-for-profit, credit unions can provide lower fees and loan rates, higher deposit rates, and dividend sharing to members. Though credit unions can and do produce earnings through good fiscal management, the belief is that those dollars belong to the members, not stockholders or management. Imagine receiving an annual dividend check from your banking establishment. It happens, but only at credit unions.  
  • The Board of Directors is comprised of credit union members who donate their time on a volunteer basis, whereas bank board members are compensated handsomely for their service. For example, of the five financial institutions to have reported board of director pay for 2012, JPMorgan, on average, compensated its directors $278,194 each. Only Bank of America, where directors are paid $275,000 each, pays less (New York Times, March 31, 2013).
  • This member-serving Board of Directors guarantees that the credit union is looking out for the interests of its members, not its own self-interest. 
  • Members can take pride and comfort in the fact that decisions are made locally and not by some unknown corporate governance structure in another city or state.