Credit Unions 101
When you hear the term “credit union”, do you scratch your head? Smile and nod? If you’re not so sure what credit unions are all about, read on, and get ready to think outside of the big-bank box.
So what is a credit union (CU)?
Glad you asked. Credit unions are not-for-profit financial cooperatives. They exist to serve their members, not to make a profit. In short, it’s a full-service financial institution that does not issue stock or pay dividends to outside stockholders (looking at you, big banks). In fact, any earnings are returned to members in the form of lower rates, better fees and higher interest rates on deposits.
Can anyone join a credit union?
It depends on the credit union. In Illinois, by statute, CUs cannot serve the general public. That’s just a fancy way of saying that to join you have to qualify through your employer, an organizational affiliation like social groups or churches or through your community (members live or work in the area the CU is located), like Andigo.
Who owns the credit union?
Credit unions are an economic democracy. Wait, what? That means every member (you) of the CU has equal ownership regardless of how much money a member has on deposit.
Do credit unions pay taxes?
Yes. Credit unions pay sales, property and payroll taxes. Congress does exempt CUs from federal income taxes. As a fun fact, this exemption was established in 1937, affirmed by statute in 1951 and then reaffirmed in 1998 H.R. 1151, the Credit Union Membership Access Act. It states the following:
“Credit unions, unlike many other participants in the financial services market, are exempt from Federal and most State taxes because credit unions are member-owned, democratically operated, not-for-profit organizations generally managed by volunteer boards of directors and because they have the specified mission of meeting the credit and savings needs of consumers, especially persons of modest means.”
How’s that for a history lesson?
Are credit unions insured?
The NCUA (National Credit Union Association) insures all credit union accounts for up to $250,000 on member deposits. Sound familiar? Most big banks are ensured through the FDIC (Federal Deposit Insurance Corporation) for the same amount. Andigo, and many other credit unions, have the added ESI (Excess Share Insurance), which provides additional insurance for your savings account for up to $250,000. Feel insured yet?
What are some other benefits of joining a credit union?
Aside from better rates and lower fees, financial education for members is typically part of a credit union’s goals. Andigo has partnered with GreenPath Financial Counseling to help members with financial planning and decision making. Becoming financially educated shouldn’t be a daunting task, at least we think so. Many credit unions offer programs to help their members and potential members feel at ease with managing their finances.
What else do credit unions offer?
Because credit unions are full-service financial institutions, they offer just about everything a big bank offers, plus at better rates and lower fees. This can include but not be limited to:
- Credit/debit cards
- Shared certificates
- Home, Home equity, vehicle, business, mortgages, personal & student loans
- Shared branch network (allows you to use other credit union ATMs and certain services)
- Business banking
- Wealth management services
Credit unions are pretty awesome, right? Sarah Silverman thinks so too.