Are Credit Unions Non-Profit Organizations?

While most credit unions try to make a profit (and usually do), they are chartered as member-owned nonprofits. While this might not seem to make sense, looking into credit unions and how they operate might lead you to determine that banking at a credit union, rather than at a commercial bank, is the right choice for your needs.

​Read More:​ What's the Difference Between a Bank and a Credit Union?

If nonprofits don’t make more money than they spend each year, they’ll eventually go bankrupt. The IRS doesn’t have a problem with nonprofits making annual profits, as long as that isn’t their goal, and as long as they spend most of the money they take in doing the work they were founded to do.

​Read More:​ Purpose of Credit Unions

Credit unions aim to stay financially viable, but they often return some of the annual profits they make to their members (customers like you) in the form lower loan and credit card rates, or higher interest payments on checking and savings accounts, explains Westerra Credit Union.

Other credit unions pay dividends directly to members, like Valley Credit Union. If you belong to a nonprofit electric utility cooperative, you might have seen the co-op’s profits come back to you in the form of an annual customer dividend payment.

​Read More:​ The Disadvantages of Credit Unions

Credit unions are founded to serve a specific group, according to the National Credit Union Administration. Groups can include school teachers in a particular state or members of others trades, such as firefighters, plumbers or electricians in a specific geographic area. Some credit unions serve current and former members of the military, while others are faith-based.

Other credit unions serve geographic areas, regardless of profession or other specific ties. Many of these credit unions, however, allow people who are not part of these groups to join. The credit union might charge a nominal fee, or ask the member to make a small donation to a charity the credit union has chosen.

Once you join, you interact with the credit union just like you do with a bank.

Credit unions generally offer all of the same basic financial products available from commercial banks. Credit union services include, but are not limited to:

• Checking and savings accounts
• Auto loans
• Student loans
• Mortgages
• Certificates of deposit
• Small-business loans
• Home-equity loans
• Business lines of credits
• Credit cards
• ATM access (via networks)

In many (if not most) cases, credit unions offer lower interest rates on loan products and higher interest rates on investment products and checking and savings accounts. This is because credit unions are nonprofit and can afford to make less money than a commercial bank.

To find a credit union in your area, type “list of credit unions” into Google and check the results. You don’t need to limit your membership to a credit union in a specific geographic area, however, if you find a mortgage, credit card or other financial product you want offered by a credit union in another region and you qualify for that credit union's membership.