**Non-profit Financial Organizations Built to Serve You**
Even though millions of Americans are members of credit unions, many still don’t fully understand what they are.
**Quick Guide**
Credit unions are non-profit financial cooperatives that serve specific member groups connected by a common bond, such as working at the same company, being part of an association, or living in a particular area. Local credit unions can serve people living or working within a specific region, whereas those catering to employees of certain companies or associations are known as SEG-based (select employee group) or sponsor-based credit unions.
More than 82 million Americans are members of one of the 10,425 credit unions across the nation, using them for some or all of their financial services. Since credit unions are non-profit, they typically offer better savings and loan rates, with low or no fees. Surveys consistently show credit unions rank highest in customer satisfaction among financial institutions.
**Principles and Organization**
Credit unions operate as democratically managed organizations, following the principle of people helping people. Members elect the board of directors, and every member has an equal vote, regardless of how much money they have deposited. This is different from mutual banks, where the number of votes depends on the deposit amount, or publicly-held banks, where voting power is based on stock shares.
Only members can serve as directors, and these positions are unpaid and volunteer-based, aimed at serving the interests of fellow members. In contrast, other financial institutions generally compensate their board members, who serve the interests of external owners. Over 129,000 Americans volunteer for their credit unions in various roles, such as board or committee members. Without external shareholders, any profits left after allocating reserves are returned to members through savings dividends, lower loan rates, or additional services.
**Managed Wisely and Covered by Federal Insurance**
Credit unions mainly provide consumer loans, along with a smaller amount of business and residential real estate loans to their members.
Deposits at federally-chartered and nearly all state-chartered credit unions are insured by the National Credit Union Share Insurance Fund (NCUSIF), managed by the National Credit Union Administration (NCUA). This fund is backed by the full faith and credit of the U.S. Government, similar to FDIC coverage for banks, ensuring member deposits are protected up to $250,000.
**Regulation and Oversight**
The NCUA, an independent federal agency, regulates federally chartered credit unions, while state-chartered credit unions are overseen by state credit union departments. Regulatory activities of the NCUA are funded by credit unions themselves, using no public money. Credit unions also must comply with regulations enforced by entities such as the Federal Reserve, Internal Revenue Service, Federal Trade Commission, Department of Justice, Department of Labor, and other federal and state agencies.
**Taxation**
Being non-profit and member-owned, credit unions are exempt from federal income taxes—a benefit extended by the federal government. Most states also exempt them from state income and many sales taxes. However, credit unions do pay payroll taxes, property taxes, and some sales taxes. Members also pay taxes on their credit union dividends.