Quiz: Do you know how Credit Unions Work?

By: Staff
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About This Quiz

During this worldwide financial recession, people are looking for ways to save money wherever possible. Credit unions offer a number of financial benefits to their members. Take this quiz to see if you know how credit unions operate and how they are different from banks.

What is a primary source of income for banks?

Banks collect interest from loans they make and also charge account fees. They typically invest those funds to make even greater profits.

What makes a credit union different from a bank?

Credit unions are typically owned by their account holders and pay no taxes due to their non-profit status.

What happens to the profits made by a credit union?

As a not-for-profit corporation, a credit union is not allowed to keep its profits. It will either use the profits to improve the institution itself or pay them to members as dividends.

How does the not-for-profit status of credit unions benefit their members?

Since they do not try to maximize profits, credit unions can afford to lend money at lower interest rates than banks can.

For which people were credit unions first established?

Already sharing one common bond, these people realized they could also all benefit by cooperatively owning their financial institutions.

Approximately how many members do credit unions have worldwide?

Of 172 million members worldwide, about 90 million Americans belong to credit unions. There are more than 46,000 such institutions around the world.

What is the primary complaint about credit unions from the banking industry ?

Because credit unions can offer lower interest rates on loans, banks feel unable to compete with these organizations.

Where and when were the first credit unions formed?

Though the cooperative movement in general began in Rochdale, England, in 1844, the first to apply the movement's concepts to finance were the Germans.

Who were the first German credit unions designed to help?

The urban poor were easily preyed upon by loan sharks. Credit unions pooled members' money to offer safe credit to those in need.

Where was the first credit union opened in the United States?

Massachusetts was the first state to establish laws for credit unions, but the first U.S. credit union was in Manchester, NH.

Under which U.S. president was the Federal Credit Union Act passed?

As part of Roosevelt's New Deal plan to fight the problems of the Great Depression, the Federal Credit Union Act created a network of credit unions that was overseen by the government.

What credit union organization was established in 1934?

The Credit Union National Association (CUNA) was established to oversee all the credit union leagues around the United States. The other two organizations were both established in 1970.

Which of the following years saw the highest number of credit unions in the U.S.?

The number of U.S. credit unions grew steadily for many years, but in the past few decades, many have merged with each other, reducing the overall number.

What did the U.S. Supreme Court determine about credit unions in 1998?

The banking industry won their case in the U.S. Supreme Court when it was determined that some credit unions were illegally attempting to increase their market share.

What do natural-person credit unions gain from their affiliation with corporate credit unions?

A small credit union needs a corporate credit union to supply it with enough cash to operate normally.

What is the legal status of a corporate credit union?

Though the term seems to imply they operate for profit, they are still non-profit entities. They are called corporate credit unions since they are larger and serve the smaller credit unions.

What institution provides liquidity to corporate credit unions in the United States?

Just as corporate credit unions serve natural-person credit unions, U.S. Central serves the large corporate credit unions.

What does the Federal Credit Union Act require for someone to qualify for membership in a credit union?

To take advantage of the benefits that a credit union offers, you must share an employer, religious institution, branch of the military or some other bond with the other members.

What is the average annual interest rate charged on a credit union credit card?

This rate is nearly three points below the interest rate for the average bank credit card and is one of the main benefits that credit union members enjoy.

What is a drawback of some credit unions?

Though most credit unions today offer services that are comparable with larger banks, their smaller size sometimes affects the availability of these services.

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