Credit unions are a type of banking institution in which the customers own and control the credit union. Credit union members elect a voluntary Board of Directors to manage the policies set by the charter of the credit union. Only a credit union member may deposit money, borrow money or use the other services of the credit union. Credit unions market themselves on the premise that they provide better service to the members because they are member owned.
Credit unions typically pay more money on dividend rates and charge lower rates than do banks. Credit unions revenues from loans and investments must remain higher than their expenses in order to remain solvent. They generally offer many of the same financial services as the banks, such as savings accounts, checking accounts (share drafts), credit and debit cards, certificates of deposit and online banking. Because they have a charter as a not-for-profit corporation, Credit unions are exempt from state and local taxes.
Credit unions come in a large range of sizes, ranging from a few members to one with hundreds of thousands of members
Credit unions are required to identify a field of membership in their charter. The membership base can be geographic, religious, cultural, ethnic, or employment based. Normally the credit union follows a rule of once a member always a member. If a member closes an account, though they may not be allowed to reopen, depending on whether or not they still qualify under the original charter. In practice, there are often many ways in which a person can qualify to become a member of the field of membership.
Tension between banks and credit unions has always existed. Banks are bitterly opposed to the credit unions, especially when the credit unions have expanded and moved into areas that were previously viewed as bank business only. Credit unions have lobbied successfully to maintain their tax exempt status because they are owned by the members and not by stockholders.
Early credit unions were viewed as being a bank for poor or low income people, but today many affluent people are credit union members. Bank trade organizations have vowed to change the tax free status through legislation in the U.S. congress, while at the same time; banks are actively competing for the banking activities of the credit unions such as ATM machines, corporate checking accounts and programs for Certificate of Deposits issuance.
by Nathan.Smarty 1 year ago
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