<< Back to Consumer Tips & Articles Archive

Why Do Credit Unions Talk Funny?

Credit unions offer many of the same services you find at other financial institutions, but sometimes use different words to describe familiar activities. It's all part of what makes credit unions significantly different from other financial service providers.

Your credit union savings represent your "share" in the financial cooperative, which is what a credit union is. Thus, you have a share savings account, or, for a fixed-term account, a share certificate account. And if you have an account you use, for example, to pay bills and finance daily recreation, you have a share draft account, so named because you're able to draw on your shares. In all respects, these accounts work the same way savings, certificate of deposit, and checking accounts work at other institutions.

Dividends are the share of earnings that credit unions distribute to shareholders -- members.

Fees and borrowing rates are lower, and savings rates higher, because credit unions are not-for-profit financial cooperatives. Profit-driven financial institutions like banks must make money to pay stockholders in proportion to their holdings. All credit union members benefit from the credit union's financial success, but bank income bypasses customers to pay a limited number of stockholders.

Your credit union shares are backed by share insurance up to $100,000. And credit unions undergo rigorous examination by the National Credit Union Administration or Pennsylvania Department of Banking to assure sound operation and management. These agencies also dictate who is eligible to join a credit union, called its field of membership.

The directors and management comply with the charter and also with the credit union's own bylaws. These are rules that members and directors adopt to define the credit union's field of membership (who's eligible to join), set the par value of shares (in other words, is each share $5, or some other value?), and describe common credit union functions.

Now that we're all speaking the same language, call a credit union and see if you’re eligible to join. Visit www.howtojoinacu.org/ to find credit unions to join.