Definition
A credit union is a financial institution similar to a bank, yet it is a nonprofit cooperative controlled by its members.
Analysis
Credit unions have restrictions on membership. Some credit unions may require that you are an employee of a certain company. Others may limit membership to local residents.
Credit unions often offer lower interest rates on many types of loans, while paying slightly higher rates of return on deposit accounts. Unlike commercial banks, there are no stockholders in which to pay dividends to. Instead, “profits” are passed on to shareholders through higher interest payments or lower finance charges.
Credit unions offer many of the same services that banks offer. Additionally, deposits are insured up to $100,000 by the National Credit Union Administration (NCUA). The NCUA is a federal agency that maintains the National Credit Union Share Insurance Fund. This is similar to the FDIC insurance program that insures commercial bank deposits.
