What are Credit Unions?
Credit Unions are financial institutions formed by an organised group of people with a common bond providing members with flexible savings, loans and a range of other financial services.
Credit unions differ from banks in several ways:
Credit Unions:
- Not-for-profit cooperatives
- Owned by members
- Operated mostly by volunteer boards
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Other Financial Institutions:
- Profit-driven private companies
- Owned by outside shareholders
- Controlled by paid boards
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These factors allow credit unions to pay dividends to their members (not shareholders) and offer them lower rate loans, higher savings rates and fewer service fees.
What is the common bond?
The common bond is the factor which unites all the members of a credit union — it is what all members have in common.
The most usual common bonds are:
- Community bond (where all the members live, and in some cases work, in a particular locality)
- Occupational bond (where all members are in the same profession or occupation, or work for the same employer)
- Associational bond (where all the members are in the same society or association)