What characterizes a credit union?

A credit union is characterized as a cooperative owned by its members. This means that the credit union is a non-profit financial institution formed to provide financial services to its members. Members have a common bond, which can be based on community, occupation, or other associations, allowing them to join and participate in the governance of the credit union. Each member typically has an equal vote in the organization's decisions, reflecting the democratic nature of a cooperative structure.

In addition to being member-owned, credit unions are designed to serve their members rather than maximize profits. This often results in better interest rates on loans and savings products compared to traditional for-profit banks, as any surplus income is often returned to members in the form of lower fees or better rates.

Understanding the nature of credit unions helps to distinguish them from other financial institutions that may not share the same member-focused approach. For instance, traditional banks operate for profit and prioritize shareholders, while governments run certain financial institutions don't usually operate like credit unions. Furthermore, while credit unions may issue credit cards, they are not defined by this characteristic alone.