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One Credit unions
Answering your questions on credit unions
What is a credit union??
Everybody could have thought about Credit union. What is credit union. The name itself explains that it’s a union of people made for their credit (loan). Credit union is a cooperative financial institution that is owned and controlled by its own members and operated for the purpose of promoting thrift(economical management). Credit union provides credit to its members at a reasonable rates and it also provides other financial services to its members. Worldwide, credit union systems vary significantly in terms of total system assets and average institution asset size.
Credit unions are called by different names. For example, in African countries they are called “Savings and Credit Cooperative Organizations” (SACCOs). In Spanish speaking countries, they are often called Cooperativas de ahorro y crédito. In Mexico they are typically called caja popular. Credit unions are termed as caisse populaire and banque populaire in French. In Afghan credit unions are called “Islamic Investment and Finance Cooperatives” (IIFCs).
What is a credit union??
We might be thinking, what is the difference between credit unions and banks?? How do they differ?? Is there any difference between them?? If you think so, the answer is yes. Credit unions differ from banks.
Banks are for-profit companies. They make money by charging interest on loans, collecting account fees and reinvesting all that money to earn more profit. They also pay state and federal taxes.
Credit unions, on the other hand, are not-for-profit institutions. They are owned by their account holders, known as members. Any profit earned by a credit union is either invested back into the organization or it is paid out to members as a dividend. Since credit unions are not-for-profit institutions, they don’t have to pay state or federal taxes.
Birth of credit union:
The idea of credit unions came about in late 19th century. It was first introduced in Europe as a part of emerging cooperative movement. Cooperatives are voluntary, self-governed associations of people that work together for a common goal. The first cooperative was founded in 1844 by a group of workers in Rochdale, England. The Rochdale Society of Equitable Pioneers, as a group was known, collected a pound(European money) from each member to open a cooperative store that sold butter, sugar, flour, oatmeal and candles. Then the cooperative movement evolved into the idea of giving member money to offer credit individuals. The first official credit unions were found in Germany in 1849 to save poor urban workers. In North America, the first successful credit unions were found in Canada at the turn of 20th century.
In 1934, President Franklin D. Roosevelt signed the Federal Credit Union Act into law. The law established a nationwide credit union system, overseen by the federal government, to help citizens with small incomes get credit for "provident purposes."
The Credit Union National Association(CUNA) was also formed in 1934 as a national organization overseeing the many existing state credit union leagues.
Membership in Credit Unions:
According to the Federal Credit Union Act, anyone can apply to join a credit union if he or she shares a common bond of employer, educational institution, branch of the military or government, church or community. Over the years, the growth of the credit union movement has resulted in nearly everyone being eligible for membership through some connection.
Credit unions offer many of the same financial services as a bank:
1. Checking accounts and ATM cards
2. Savings, money market and IRA accounts
3. Credit cards
4. Secured or unsecured personal loans
5. Mortgages and Home equity loans
6. Auto and recreational vehicle loans
7. Travelers cheques, money orders, certified cheques and currency exchange.