A credit union is a cooperative financial institution, owned and controlled by the people who use its services - its members. Credit unions serve groups that share a common bond - such as where they work, live, or go to church - and provide a safe, convenient place for members to save money and get loans at reasonable rates.

Credit unions, like other financial institutions, are closely regulated while operating in a prudent manner. The National Credit Union Share Insurance Fund (NCUSIF), administered by the National Credit Union Administration, an agency of the federal government, insures deposits of credit union members at more than 6,000 federal and state-chartered credit unions nationwide with deposits insured up to $250,000.

The credit union idea is a simple one: People should be able to pool their money and make loans to each other. It's an idea that evolved from cooperative activities in 19th century Europe and extended to Canada in the 20th century. Canada's successful efforts influenced some Americans who helped create the first U.S. credit union in Massachusetts in 1909.

In 1935, when credit unions were helping Americans through the Great Depression, the treasurer of a Midwestern credit union said that credit unions were "not for profit, not for charity, but for service," and that philosophy holds true today.

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 a volunteer board 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. This benefits members in proportion to the transactions with the cooperative rather than on the capital invested.

   For credit unions, which typically offer better rates, lower fees and superior service than for-profit financial institutions, members recognize benefits in proportion to the extent of their financial transactions and general usage.

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 the member while maintaining 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 policymakers 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, regional, 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.

   These seven principles are founded in the philosophy of cooperation and its central values of equality, equity and mutual self-help. They express, around the world, the principles of human development and the brotherhood of man through people working together to achieve a better life for themselves and their community.

Copyright © 2006 - Credit Union National Association, Inc.