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© Copyright
Fletcher Challenge Employees Credit Union 2004 |
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How Credit Unions Work
Credit Unions use deposits from members to fund loans to other members. They pay depositing members interest for the use of their money and this acts as an incentive for members to save even more. As members increase their savings, the pool of deposits expands, allowing a Credit Union to fund more loans.
Those members who borrow from the Credit Union pay interest for the use of the money. Interest on borrowings is the Credit Union's main source of income and it covers:
The interest paid
to savers |
The credit union's
operating expenses |
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Reserves for financial stability |
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Better
interest rates on deposits
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Better
interest rates on loans
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Lower
fees and charges
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Enhanced member services e.g. telephone banking
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Annual dividend paid out to all members
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