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What’s a Credit Union?

A credit union is a cooperative, not-for-profit financial institution, owned and controlled by the people who use its services. These people are called "members".  Credit unions serve people who share something in common, such as where they work, live, occupational background, or go to church.  Credit unions are not-for-profit and exist to provide a safe, convenient place for members to save money at higher rates of return, and to receive loans at reasonable rates. Most importantly, credit unions provide greater and friendlier service to the membership, as well as dividends.Credit unions are member-owned and controlled through a board of directors elected by the membership. The board serves on a volunteer basis and may hire a management team to run the credit union. The board also establishes and revises policy, sets dividend and loan rates, and directs certain operations. The result: members are provided with a safe, convenient place to save and borrow at reasonable rates at an institution which exists to benefit them, not to make a profit.  

7 Cooperative Principles for Credit Unions2

  1. Voluntary Membership
    Credit unions are voluntary, cooperative organizations, offering services to people willing to accept the responsibilities and benefits of membership, without gender, social, racial, political or religious discrimination. Many cooperatives, such as credit unions, operate as not-for-profit institutions with volunteer boards of directors. In the case of credit unions, members are drawn from defined fields of membership.
  2. Democratic Member Control
    Cooperatives are democratic organizations owned and controlled by their members – one member, one vote – with equal opportunity for participation in setting policies and making decisions.
  3. Members’ Economic Participation
    Members are the owners. As such, they contribute to and democratically control the capital of the cooperative.
  4. Autonomy and Independence
    Cooperatives are autonomous, self-help organizations controlled by their members. If the cooperative enters into agreements with other organizations or raises capital from external sources, it does so based on terms that ensure democratic control by its members and maintains the cooperative autonomy.
  5. Education, Training, and Information
    Cooperatives provide education and training for members, elected representatives, managers and employees so they can contribute effectively to the development of the cooperative. Credit unions place particular importance on educational opportunities for their volunteer directors and financial education for their members and the public, especially the nation’s youth. Credit unions also recognize the importance of ensuring the general public and policy markers are informed about the nature, structure and benefits of cooperatives.
  6. Cooperation Among Cooperatives
    Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, state, national and international structures.
  7. Concern for Community
    While focusing on member needs, cooperatives work for the sustainable development of communities, including people of modest means, through policies developed and accepted by the members.
Credit Union Principles & Philosophy Conference: May 13-15, 2015, Dallas, Texas. Presented by Cornerstone Credit Union League’s Development Educators: 1World Council of Credit Unions 2Unite for Good™

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Who owns a credit union?

Most financial institutions are owned by stockholders, who own a part of the institution and intend on making money from their investment. A credit union doesn't operate in that manner. Rather, each credit union member owns one "share" of the organization. The user of credit union services is also an owner, and is even entitled to vote on important issues, such as the election of member representatives to serve on the board of directors.

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How did credit unions start?

The first credit union cooperatives started in Germany over a century ago. Today, credit unions are found everywhere in the world. The credit union movement started in this country in Manchester, New Hampshire. There, the St. Mary's Cooperative Credit Association, a church-affiliated credit union, opened its doors in 1909. Today, one in every three Americans is a credit union member.

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What is the purpose of a credit union?

The primary purpose in furthering their goal of service is to encourage members to save money. Another purpose is to offer loans to members. In fact, credit unions have traditionally made loans to people of ordinary means. Credit unions can charge lower rates for loans (as well as pay higher dividends on savings) because they are nonprofit cooperatives. Rather than paying profits to stockholders, credit unions return earnings to members in the form of dividends or improved services.

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Are savings deposits insured?

Yes. All savings accounts are insured up to $250,000 by the NCUA, the National Credit Union Administration, an agency of the federal government.

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Who can join a credit union?

A credit union exists to serve a specific group of people, such as a group of employees or the members of a professional or religious group. This is called a "field of membership." The field of membership may include where they live, where they work, or their membership in a social or economic group.

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