Definition
The term credit union refers to a not-for-profit financial institution that provides services to its members. Credit unions accept deposits and loans money to its membership in addition to other financial services.
Explanation
Credit unions are member-owned cooperatives, established to provide its clients with financial services such as lending money and accepting deposits. Their not-for-profit status, along with a volunteer board of directors, allows these institutions to provide competitive interest rates on both loans and deposits.
Members of a credit union are also its owners. As such, these member / owners are able to vote volunteers to the credit union's board of directors. Individuals can gain access to credit unions in the following ways:
Employers: large employers oftentimes sponsor credit unions as part of a larger offering of benefits to their employees.
Relatives: once a member of a credit union, membership may be extended to family members too.
Geography: credit unions are sometimes established to service a community.
Affinity Groups: finally, credit unions may also be associated with affinity groups such as places of worship, boards of education, homeowners' associations, and bargaining units.
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