What is a Credit Union?
A not-for-profit financial cooperative owned and operated by members like you.
Even though millions of Americans are members of credit unions, many people still don't understand what credit unions are.
Overview
Credit unions are not-for-profit financial cooperatives serving groups of members who have something in common such as employment at a company, membership in an association, or residence in a particular geographic area. A credit union that may serve anyone who lives or works within a particular geographic area is called a community credit union. A credit union that serves groups of employees or associations is typically called a SEG-based (for select employee group) or a sponsor-based credit union. DCU is SEG-based.
More than 139.3 million U.S. consumers are member-owners and receive all or part of their financial services from the nation's 4,604 federally insured credit unions.
Philosophy and Structure
Credit unions are democratically owned and controlled institutions, based onpeople helping peopleprinciples. A credit union's board of directors is elected by members. Each member has an equal vote regardless of how much he or she has on deposit. At mutual banks, the amount on deposit determines the number of votes. In publicly held banks, the number of shares of stock determines this.
Only members may serve as directors. They are unpaid volunteers and represent the interests of their fellow members who use the credit union. Board members at other types of financial institutions are paid and represent the interests of the outside owners. Volunteers are an important credit union resource. Presently, more than 129,000 Americans volunteer for their credit unions serving as board members, committee members, or providing other assistance. Since credit unions have no outside stockholders, after reserves are set aside, earnings are returned to members in the form of dividends on savings, lower loan rates, or additional services.
Prudently Managed and Federally Insured
Credit unions primarily engage in consumer loans and, offer business and residential real estate loans to their members.
The National Credit Union Administration (NCUA) operates the National Credit Union Share Insurance Fund (NCUSIF) to protect accounts at federally insured credit unions.NCUSIF parallels Federal Deposit Insurance Corporation (FDIC) insurance in banks.
DCU share accounts are insured up to $250,000 per person and Individual Retirement Accounts (IRA) are insured separately up to $250,000.Joint accounts are insured separately up to $500,000 (maximum $250,000 for each joint owner). The interest that a joint owner has in all joint accounts will be added together and insured up to $250,000.Insurance for Trust, Fiduciary, and Business (Partnerships, Limited Liability Companies, or Corporations) accounts may vary.
For additional information, please visit theNCUA website.
Regulation and Supervision
Federally chartered credit unions, like DCU, are regulated by the NCUA, an independent federal agency. State chartered credit unions are regulated by their state's credit union department. No taxpayer money is used for NCUA regulation as all NCUA and NCUSIF activities are paid for by credit unions. Credit unions are also subject to many other laws and regulations administered by such agencies as the Federal Reserve, Internal Revenue Service, Federal Trade Commission, Department of Justice, Department of Labor, and other federal and state agencies.
Taxation
Because of the member-owned, democratically operated, not-for-profit nature of credit unions, the federal government has made credit unions exempt from federal income taxes. Many states have extended this to state income and most sales taxes. Credit unions do pay payroll taxes, property taxes, and some sales taxes. Credit union members are required to pay taxes on their credit union dividends.
This article was prepared with the assistance of the Credit Union National Association.
