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A credit union is a member-owned nonprofit financial cooperative that functions similarly to a commercial bank. Credit unions offer similar services to retail banks to their members, such as deposit accounts, credit, and other financial services. Credit unions are known as SACCOs in a number of African countries (Savings and Credit Co-Operative Societies). Individuals are served by natural-person credit unions (also known as “retail credit unions” or “consumer credit unions”), as opposed to “corporate credit unions,” which service other credit unions.
In most jurisdictions, credit unions and banks are obliged to ensure a reserve ratio of assets to liabilities. If a credit union or traditional bank becomes unable to maintain positive cash flow and/or must declare bankruptcy, its assets are divided among creditors (especially depositors) in order of seniority under bankruptcy law. All depositors will forfeit some or all of their initial deposits if total deposits exceed assets left after more senior creditors are paid.
Credit Union vs Bank
Credit unions are far smaller than banks, and they are organised to service a certain region, industry, or community. Therefore, since most credit unions have fewer branches than big banks doesn’t mean they can’t have a similar reach. Several credit unions are members of an ATM network that helps them reach a wider audience. While credit unions must still make enough money to pay its expenses, the lack of a profit motive allows them to charge lower fees and account minimums, offer better savings rates, and offer lower borrowing rates to their members and shareholders.
Credit Union Examples
New York University Federal Credit Union (NYUFCU) is a credit union that serves New York University students, alumni, current and former workers, as well as their immediate family members and caregivers. Many of the same services that traditional banks provide, such as internet banking, personal loans, and adjustable and fixed-rate mortgages, are available. NYUFCU promotes savings account rates that are several tenths of a percentage point higher than the national average, and loan rates that are many whole percentage points lower. Furthermore, despite having only 15 ATM locations on or near the NYU campus, NYUFCU is a member of an ATM cooperative network that allows members to utilize tens of thousands of credit union ATMs nationwide for free.
Credit Union Service
Credit unions provide a wide range of services and products to meet the needs of their members, including low-cost loans, safe savings, and insurance. Each credit union is a self-contained, “not-for-profit” organisation that exists entirely for the benefit of its members, not for the benefit of the stock market. As a result, decisions about the products and services offered to their members are determined at the local level. Because credit unions were founded purely to assist their members, they strive to provide fair and reasonable rates at all times. Credit unions provide a diverse range of products and services tailored to their members.
Current Account: A lot of credit unions now provide members with a current account and a debit card as part of their service package.
Online Banking: The majority of credit unions provide online banking. You must contact your credit union directly if you want to sign up for internet banking or if you have any problems with your account, such as forgetting your log in information.
Budget Account: Many credit unions provide its members with a budget account. Budget accounts are typically used to assist members in planning and paying for household costs such as electricity bills, phone bills, property taxes, and holidays, among other things.
Conclusion
Credit unions assist economic development by mobilising large amounts of savings in the community. They remain a source of economic development in the financial sector, and as a result, their macroeconomic importance has grown significantly. By providing inexpensive terms and conditions for access to credit to finance a wide range of programmes, credit unions have revolutionised the social and economic position among many members, enabling them to rise from the disadvantaged to the homeowner class.
