Credit unions are non-profit financial institutions the account holders of which are called members and are the co-owners of their union. While credit unions share many features with other types of financial organizations, such as banks and lenders, they also have some features that are unique to them – here are some of these defining characteristics.
Characteristics Shared with Other Types of Financial Institutions
Like banks, a local Castle Rock credit union offers various types of accounts, including checking accounts and savings accounts and they also offer credit cards, various credit lines and loans. They usually have branch offices as well as ATMs.
Characteristics that Distinguish Credit Unions
Credit unions are also very different from conventional banks, the areas that set them apart being their approach toward profit and toward their account holders.
While banks are profit-oriented companies that are either privately owned or traded publicly, credit unions are not-for-profit organizations that are owned by their account holders – called members, credit union account holders are owners of the credit union they join, which also means that the profit made by credit unions is distributed toward the members, usually in the form of yearly dividends. The ownership status of the members also gives the members the right to vote about important decisions related to the way their credit union is run, such as the composition of the board or the developments in the field of IT infrastructure.
Another important difference between banks and credit unions is the way they handle customer service. While the services of large banks are often impersonal and cold, a Castle Rock credit union provides services that are more accessible, friendlier and more focused on the needs of the customer. Credit unions are often involved in community enrichment projects and many of them offer free financial education seminars and workshops to their members.
The products and services available with credit unions are essentially the same as the features offered by banks, but with some notable differences. The terms and conditions related to the products and services available with credit unions are usually much more favorable than the ones offered by banks – not being focused on profit, credit unions offer higher interest rates on deposits, lower interest rates on loans, smaller minimum deposits, mortgages, auto loans and other loans with more convenient repayment conditions. Most credit unions are also willing to work with people who are not considered creditworthy by banks and who have had previous difficulties repaying loans.
Like banks, credit union deposits are also guaranteed by the government, but in a slightly different way. While bank deposits are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to the amount of $250,000, the deposits made in federal credit unions and in many state credit unions are guaranteed up to the same amount, but by a different organization, one called the National Credit Union Administration. Not all credit unions provide such guarantee, though – some of them are privately insured, so before you choose the credit union to join it is a good idea to check the organization’s insurance affiliation.