Whether you’re a member of a CU or still a part of a, dare we say it, bank, knowing how a credit union operates is still a useful piece of knowledge to have. We’ve explained the differences between banks and credit unions, but it’s time to understand how credit unions work as financial institutions.
The Background Story of Credit Unions.
The credit union industry’s intention was to make credit unions a cooperative financial institution; of which CUs still are. Now, you may be wondering what a cooperative financial institution is, right? Put simply, it allows members to join a CU based on a commonality, like: where you work, where you live, if family member’s already a member, where you went to college, if you, or a spouse, served in the military, etc.
Financial Institutions Worry About Making A Profit?
Credit unions of any size and any location are not-for-profit organizations. CUs are owned by members and are governed by a strictly volunteer-based board. Also falling under the cooperative financial institution umbrella, credit unions do two things with profit: 1) invest it back into the credit union through specials, lower rates, discounted services and 2) return the profit to members as a dividend. You can believe that shareholders are not gobbling up all of the profits, that rightfully belong to our members!
What Do You Mean We Don’t Pay Taxes?
Buzz around the Don’t Tax My Credit Union movement has been a highly publicized topic for quite some time. But, it’s time to set the record straight! Yes, we as credit unions do not pay state or federal taxes because we are 501 c(3) organizations (a.k.a. non-profits). However, we do pay taxes for things like property, payroll, and various business taxes. Bigger banks believe this is an unfair advantage that credit unions hold and are trying to strip CUs of their non-profit status. IF that should happen, our ability to offer members low interest rates and higher returns on savings will take a hit; ultimately hurting the communities that CUs thrive in. It’s time to join the fight and take action!
Credit unions are working each and every day to better the communities in which we operate. It’s our mission to bring high quality, reliable financial options and education to help our members.