USA Credit Unions - Are They For You

Just about everyone has heard of credit unions but many of them have no idea what they are. Credit unions are often mentioned in the business and finance sectors of the local newspaper and usually feature highly in the lifestyle and money sections. To fully understand the benefits of using credit unions vs. banks, you must understand what a credit union is and how it works. Basically, a credit union is a financial institution that is considered non-profit and owned privately, as well as fully controlled by its members. The main focus of a credit union is to provide financial services and credit at very reasonable rates. US credit unions typically have some sort of community based focus. However, some of them focus on things such as sustainable worldwide development at a local level.

The Origins of Credit Unions

The US credit union as it is known today was actually started by a gentleman named Franz Hermann Schulze-Delitzche in Germany, in the year 1852. Later, the same man would go on to form the entire credit union system. Then, in the year 1864 Friedrich Wilheim Raiffeissen developed the very first rural credit union. Because there was such a vast need for financial institutions in the rural sections of Germany, as well as a lack of proper human resource facilities, the methods employed by Raiffeissen led to the onset of social funding which modern credit unions are notorious for today.

Credit Unions VS Banks

There are many prominent differences between banks and credit unions. Unlike having a bank account in an institution that is owned by others, a credit union account is actually owned by its members. The board of directors is elected by members in a sort of democratic process. Interest rates and other such issues are voted on and decided on by the members and the board. The only people who can deposit or borrow money from the credit union are the members themselves. This in itself makes the credit union much more beneficial to the financial well being of its members.

Dividends and Credit Unions

There are about 85 millions members of US credit unions today and the number grows even more every year. In fact it is estimated that about half of the people who are active economically are members of a credit union. US credit unions are cooperative, tax exempt, and are operated on a non-profit basis. Because they are non-profit organizations, if they should happen to earn more money than what is needed for operating costs, any additional money that is brought in is divided among the members in the form of a dividend check. This alone is one of the most attractive aspects of joining a credit union, rather than a bank.

Deciding whether or not to use a bank for your financial needs or a credit union can be an easy decision provided you are armed with all of the facts needed to make a wise choice. The first thing you should do is find credit unions in your area and find out if you are in fact eligible to join one. Ask many questions to determine if your financial needs will be met. If you find that you are eligible to join the credit union you have chosen, you may want to check into things like interest rates as well as fees you will incur for services like using the ATM. In many cases credit unions charge a higher fee for ATM transactions. The main focus should be on whether joining a credit union will benefit you in the long run, more so than staying with your current financial institution.