A credit union is considered as an organized financial institution that is owned and operated by a board of volunteer members, who are also one of the account holders in that specific credit union. The World Council of Credit Unions has defined credit unions as cooperative, not for profit institutions. It functions to serve its customers by promoting savings, extending loans at favorable rates, and providing different kinds of financial products and benefits. Credit union systems differ in functions, size, and overall assets as per the country of location.
Who can join credit unions?
The membership of varied credit unions is determined by the unions’ common bonds. Such a bond can be the workplace or the residence of the members, or their membership to an association like schools, trade unions, and churches, etc.
State chartered credit unions
The different states in America regulate their respective state chartered credit unions. The affairs and management of such credit unions are overseen by volunteers and private members. As per ‘Financial Markets and Institutions’ over 72 percent of the funds in these credit unions consist of draft accounts and member savings. State chartered credit unions provide different kinds of accounts such as share certificates, share draft accounts, money market accounts, and share accounts. A state employee credit union is an apt example of a state chartered credit union.
Corporate credit unions
Also referred to as central credit unions, corporate credit unions offer investment opportunities, financial services, and loans to its consumer member credit unions. The National Credit Union Administration (NCUA) or some other state body charters and manages corporate credit unions. One of the best examples of a corporate credit union is the U.S. Central Credit Union. It was founded in 1974 so as to provide credit services to different credit unions. It extends an array of payment solutions to over 7,900 customer credit unions, as of April 2010. Domestic wires, electronic bill payments, automated clearing house, and international services are some of the facilities offered by corporate credit unions. The available investment opportunities consist of loans and lines of credit, reporting and brokerage services, term investments, investment advice, and network security safekeeping program or NSSP. It is used for safekeeping all corporate and credit union securities. The NCUA has stated that thirty two federally insured corporate credit unions are located in the United States.
Federally chartered credit unions
Federally chartered credit unions are not for profit credit unions which have been chartered by the union government. ‘Private Wealth Management’ has stated that federal credit unions are regulated by the National Credit Administration. These unions are decentralized. Investment, loans, credits, and other financial services are managed by its members. The board of volunteer members who govern and manage a federal credit union are also elected by the members. The chartering of the federal system of credit unions was established in the year 1934 after the passage of the Federal Credit Union Act by the Congress. Before this act, a majority of credit unions were state chartered credit unions.