What is a Credit Union?
Credit unions are not-for-profit financial co-operatives, dating back to the 16th century. Because individuals’ ability to borrow from banks was greatly restricted, farmers pooled together their funds to lend each other. The original concepts of ownership by all and lending at reasonable rates continue until this day.
At Leyden Credit Union (LCU), each member is required to maintain a $25.00 savings account and is in turn an owner of the credit union. Because it is not-for-profit, savings rates at LCU are generally higher than those of banks while rates for loan products are generally lower than banks. Fees are significantly lower and profit is returned to members in the form of dividends.
Each member is entitled to vote for our Board of Directors, who determine credit union policies. Our directors are members who volunteer their time and are selected at the Annual Meeting. In contrast, those in the banking industry are chosen by management and are paid for their services.
Below is a comparison of how credit unions differ from banks.
|Not-for-profit||Profit returned to shareholders|
|Owned and operated by members||Owned by shareholders who have no part in everyday operations|
|Board of Directors voted by members at Annual Meeting and volunteer their services||Board of Directors chosen by management and compensated for services|
YOUR credit union differs from banks in some fundamental ways. Here are some other ways YOUR credit union differs, and terms that you hear:
Share Account: Your Savings Account at the credit union is called a “Share Account.” That’s because you are a “shareholder”, making you an owner in the credit union.
Dividend: The interest paid on your savings account is called a “dividend.”
Share Draft Account: Technically, your checking account is called a “Share Draft Account.” That’s because what you are really doing is writing a “draft” against your shares with the credit union.
Volunteer Board of Directors: Most financial institutions have a Board of Directors. What makes your credit union different is that these board members, all of whom belong to the credit union, volunteer their time.
Not-for-Profit: Any profit earned from borrowing funds or investments is returned to you in the forms of dividends, lower fees and reduced loan rates. Because credit unions are organized to help members, not for the specific purpose of making money, they are described as not-for-profit.