Federal Credit Union – FCU

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Federal Credit Union – FCU

What Is a Federal Credit Union?

The National Credit Union Association regulates and supervises federal credit unions (FCUs) (NCUA).

The National Credit Union Administration (NCUA) is a federal government body mandated by the Federal Credit Union Act of 1934 to administer the national credit union system in the United States. The NCUA charters US credit unions in a manner similar to how the Office of the Comptroller of the Currency charters national banks.

Key Takeaways

  • A federal credit union (FCU) is a credit union that is governed by the National Credit Union Association (NCUA).
  • The Federal Credit Union Act of 1934 created the Federal Credit Union system to promote savings and the financing of homeownership and other community-oriented financial services.
  • FCUs, like credit unions, are mutual enterprises controlled by members rather than outside stockholders.

Federal Credit Unions Explained

There are several federal credit unions with varied membership criteria. Federal credit unions provide services equivalent to national and state-chartered banks. Federal credit unions, on the other hand, are co-operatives, sometimes known as mutual corporations.

A credit union is a sort of financial cooperative that offers standard banking services. Credit unions may be founded by major firms, organizations, and other entities for their workers and members, and can range in size from tiny, volunteer-only operations to enormous enterprises with thousands of participants throughout the nation. Participants establish, own, and run credit institutions. As such, they are non-profit organizations with tax-exempt status.

In order to operate in the United States, federal credit unions must be chartered by the National Credit Union Association, or NCUA. Its membership includes both big and small credit unions, including over 80% of the top 100 credit unions. Its activities include representing, informing, educating, and aiding its members on matters affecting the sector. One of its principal goals, based in Arlington, Virginia, is to influence legislation and regulations impacting federal credit unions.

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Mutual Company Structure

Federal credit unions are a major kind of mutual company in the United States. Many insurance businesses were formed as mutual corporations, but a demutualization movement in the 1990s forced a shift away from this structure.

Mutual firms are privately held, co-operative businesses owned by its members. Membership eligibility is often determined by separate member affiliations such as teachers unions, firefighter unions, federal employee unions, and others. Many credit unions have greater eligibility restrictions that may include people from a certain geography or other broad qualities.

Mutual company members of credit unions possess shares since they are a co-operative. Deposits are used to distribute shares. As a result, the customary minimum value required for a borrower to create a bank account is equivalent to a stake in the firm. Members must maintain a certain amount of deposits in order to meet shareholding requirements.

The fact that deposits may be insured by the US Treasury, equivalent to FDIC protection, makes credit unions even more appealing. Credit unions must be federally chartered or state-chartered in order to acquire FDIC protection (NCUSIF).

Products Offered

Credit unions provide the same goods as commercial banks. Credit unions often provide more tailored product offers depending on the interests of its members.

Checking accounts, savings accounts, money market accounts, and loans are all common offerings. Credit union members sometimes enjoy better rates on savings accounts and cheaper borrowing fees than regular bank customers since these organizations are fundamentally owned by the individuals who deposit money with them.

Credit unions often provide educational opportunities to its members. Popular seminar themes often include house purchasing and personal financial advice.

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