How do credit unions work?

Explore how credit unions operate with a focus on members, cooperative ownership, and community impact, offering a unique approach to financial services.

Many people aren’t aware of all the perks that come with joining a credit union. A credit union is a financial institution offering many of the same financial products and services as banks; however, it is not a bank. Banks and credit unions are different and credit unions are often recognized for providing better benefits. We’re here to explain those differences and benefits, as well as answer, “How does a credit union work?”

Is a credit union a bank?

No. A credit union is a full-service financial institution that operates similarly to a bank because it offers financial products and services. The two, however, differ in many ways:

A  credit union is a not-for-profit, member-owned organization and cooperative. Not-for-profit (different from nonprofit) means the goal of a credit union is not to make a profit for stockholders. Rather, the goal is to reinvest revenue into the organization to benefit members and give back to the community.

Banks  are investor-owned, for-profit financial enterprises. Banks pay out large dividends to their shareholders; whereas credit unions pay out dividends to their members. While the goal of a credit union is to meet its members’ needs with the best terms and customer service, banks strive to earn profits for their investors.

Credit unions focus on their members and their financial well-being through affordable rates and zero-to-low fees, financial education and personalized, caring customer service.

What is a cooperative?

As a cooperative, credit unions operate as democratic, member-controlled and member-operated entities. Members get to vote for the organization’s board of directors who are volunteers. This democratic approach supports a credit union’s goal to serve in the best interest of its members and for the greater good of the community. For more information, visit the National Credit Union Foundation’s “The Cooperative Principles” page.

Also, credit unions are typically local and support specific groups or communities that share a common bond, known as a field of membership. Desert Financial was originally founded for teachers, and throughout the past 80+ years, has expanded its field of membership throughout most of Arizona, making membership available to almost everyone in Arizona. Check out our field of membership eligibility below, under “How to become a Desert Financial member”.

Better rates and member rewards

Since credit unions share their success with members, they tend to offer more favorable product offerings and benefits. These may include zero-to-low fees for products and services, lower interest rates on loans, higher interest rates on deposit accounts and  free checking. A credit union may also redistribute profits to reward loyal members in the form of cash bonuses, discounts on certain fees and partner services and free perks.

Federally insured

The National Credit Union Share Insurance Fund (NCUSIF) operating through the National Credit Union Administration (NCUA), insures deposited funds and all federally insured credit unions up to at least $250,000 per individual depositor. The NCUA states that “federally insured credit unions offer a safe place for credit union members to save money” and that members “have never lost a penny of insured savings.”¹

Personalized services and exceptional experiences

Credit unions carry a reputation for developing personal relationships with their members, so they can better meet their individual needs. As a local institution, credit unions care deeply about their community. That’s why they value personal engagement with their members. Credit unions want to help their community members achieve their goals, build their futures and live with financial stability.

Community outreach

Many members enjoy being a part of an organization with a mission to do good within the community. Credit unions are passionate about donating to local charities and planning and participating in community service projects. Desert Financial gives back to the community by providing financial literacy workshops and financial assistance to local partners like Phoenix Children’s Hospital and the Boys & Girls Clubs of the Valley. Desert Financial also makes a difference by performing Random Acts of Kindness and giving back to teachers.

How to become a Desert Financial member

It’s easy to become a member and open an account.² You only have to meet ONE of these three eligibility requirements:

• Live, work, attend school, volunteer or worship in our membership coverage area, which includes all of Arizona (with the exception of Apache, Graham, Greenlee and Santa Cruz counties).
• Be an immediate family member of a current Desert Financial member.
• Be an employee of Desert Financial.

Businesses must be located in the state of Arizona in order to be eligible to join.