How Credit Unions Work

Credit unions are just like banks as both hold deposits, have ATM cards and offer investment services but the difference is the services that they offer and the way the institution is ran.

Credit unions are not for profit institutions that are owned by account holders who are known as members. The profit they get is either paid out to the members or invested back in to the business. Being that they are not for profit organizations, they do not pay federal or state charges thereby making them charge low interest rates. Credit unions were designed to be cooperative institutions for people who share a common bond with most members being of the same community, church, college or company. They have become more popular in the recent years but its growth is meeting strong resistance from other industries such as banks.

They see them as being unfair in the competition with others being accused of signing on members with no common bonds in an attempt to increase their size and power and they are needed to pay taxes just like others. Members of credit unions share a common bond such as where they live, work or worship with their service being to the poor which is blended well with the service to a broader spectrum of the population. This allows credit unions to offer competitive rates and fees as compared to other financial institutions. Among this is the reason behind their strong resistance in the markets. These other financial institutions feel that they are not fair as their rates are down.

Credit unions products and services are a full range of financial services with credit remittances and insurance being their primary savings. They earn from their net income that is applied to lower interest on loans and higher interest n savings. They have main offices with shared branching, Automated Machines, POS devices, PDAs, cell phones and internet. These are the items that they use in their service delivery. Credit unions have evolved in to the powerful entities that is why financial institutions require them to be treated as others are.


Ben Arhin


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