Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Credit Union

What it is:

A credit union is a financial institution that is owned and controlled by its members rather than shareholders. The members of the credit union pool their deposits and provide loans and other financial services to each other.

How it works (Example):

The services offered by a credit union include a wide range of financial services, such as savings accounts, checking accounts, credit cards, certificates of deposit and online financial services.

A credit union’s fees, interest rates and levels of service are highly responsive to the needs of its members. Generally, they offer lower interest rates on loans and higher interest rates on savings accounts and certificates of deposit.

Credit unions may be formed among any group of members who have a common interest -- usually community groups or employees of a particular organization. The board members of the credit unions are usually volunteers. Credit unions are generally not-for-profit, so often profits are shared by members.

Why it Matters:

Credit unions offer most of the same services as banks, but differ in that individual members are owners and there are generally less assets under management. Because credit unions are usually considerably smaller than banks, they are able to offer more personalized advisory services to their members and they may offer lower cost banking service.

Federal and most state-chartered credit unions in the United States are able to insure their members’ savings accounts through the National Credit Union Administration, a federal organization with the full faith and credit of the U.S. government.

Related Terms View All
  • Quiet Title
    For example, let's say that Company XYZ is a company that flips houses, meaning they buy...
  • Salary Freeze
    For example, Company XYZ makes widgets. Company ABC recently launched the new iWidget,...
  • World Bank
    Based in Washington, D.C., the World Bank is funded and managed by several member...
  • Telephone Booth
    When an investor wishes to buy or sell a security listed on the NYSE, she "places a trade...
  • Kill
    Let's assume you want to purchase 1 million shares of Company XYZ at $20 per share. You...