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What is a Credit Union?

So what is a credit union, anyway? Although both credit unions and banks provide similar services to consumers, credit unions are nonprofits, while banks are for-profit organizations.

That single difference is the foundation for most of the others. When a company exists primarily to generate profit, its core operations are organized around maximizing that profit for return to its ownership.

A credit union, though, exists in principle to serve a community of people tied by a “bond of association,” which may be based on geographical region, employer, membership in another association, faith or other factors.

Credit unions serve that community by providing financial products to their members with the most favorable terms they can afford to offer. Instead of offering accounts to customers and large dividends to a small group of owners, as banks do, credit unions offer small dividends — and discounted loan rates, reduced fees and other benefits — to a large group of members. Credit union members are, in that sense, both customers and owners.

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