How do credit unions differ from banks and savings and loans?

Like credit unions, these other financial institutions accept deposits, make loans, and offer checking accounts. Unlike credit unions, they are in business to make a profit. Banks and savings and loans are owned by stockholders whose interests include earning a healthy return on their investment. A credit union, on the other hand, is a cooperative, not-for-profit financial institution chartered by the state or federal government. It is owned and controlled by its members and organized to promote thrift and provide credit to those who belong to it.

Members of a credit union share a common bond defined by the credit union's charter. This may include the same workplace, same church or same professional groups. It may also include the same neighborhood, community or rural area.

Eligible people become members of a credit union by depositing money and acquiring a share in the credit union. Members vote for the credit union's board of directors, each member having one vote. Officers and directors are chosen from the membership and serve on a voluntary basis. Since there are no stockholders, earnings not set aside for reserves are returned to members in the form of lower interest rates on loans, higher interest rates on savings, and/or on new services being offered.

Like other types of financial institutions, however, credit unions are closely regulated by the federal government.