Credit union

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A not-for-profit association of individuals who form a special type of banking institution to serve their unique financial interests. Credit union members must, by law, have at least casual affinity with one another: a common employer, shared membership in another association (such as a union), etc. Family members of the person who shares that affinity are also usually eligible to join the credit union.

Membership in a credit union comes simply by opening a deposit account or securing a loan. Members choose their credit union's leadership and, thus, its policies (such as where to build branches). Votes are allocated per individual member, not per dollar.

Credit unions often provide lower cost banking services than commercial institutions for at least three reasons. First, credit unions are not-for-profit and do not need to charge extra fees in order to generate profits for shareholders. Second, because of the affinity among members, credit unions often have lower default rates on loans, not unlike microlending organizations. For example, IBM's credit unions claim to have among the lowest default rates in the U.S. Also, some credit unions enjoy special benefits, such as subsidized rent, given by employers.

The National Credit Union Administration (http://www.ncua.gov), a federal agency, supervises credit unions and provides insurance coverage for deposit accounts.

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