What Is a Credit Union? Understanding How Credit Unions Work
What Is a Credit Union?
A credit union is a not-for-profit financial cooperative owned by its members. Unlike banks, which are owned by shareholders and operated to generate profits for investors, credit unions are owned and governed by the people who use their financial services.
Credit unions offer many of the same products and services as banks, including checking accounts, savings accounts, loans, mortgages, credit cards, online banking, and mobile banking. The primary difference is their ownership structure and member-focused mission.
When you join a credit union, you become both a member and a partial owner of the institution.
How Does a Credit Union Work?
Credit unions operate by pooling deposits from members and using those funds to provide loans and other financial services to fellow members.
Any earnings generated by the credit union are generally reinvested into the organization to support operations, improve services, build reserves, and potentially offer competitive rates and lower fees. Because every credit union is different, products, rates, fees, and membership requirements can vary.
Credit unions are governed by a volunteer board of directors that is elected by the membership. However, some state-chartered credit union positions are paid ones, which would result in a board that is not all volunteer.
Key Characteristics of Credit Unions
- Member-owned financial institutions
- Not-for-profit cooperative structure
- Governed by an elected board of directors
- Offer many of the same products and services as banks
- Membership eligibility requirements may apply
- Federally insured credit unions are regulated by federal agencies
What Is the Difference Between a Credit Union and a Bank?
One of the most common questions consumers ask is whether a credit union is different from a bank.
While both institutions provide similar financial products and services, their structures differ.
| Credit Union | Bank |
|---|---|
| Owned by members | Owned by shareholders or investors |
| Operates as a cooperative | Operates as a for-profit business |
| Members can vote in board elections | Customers generally do not vote on leadership |
| Membership eligibility may be required | Typically open to the general public |
For many consumers, the day-to-day banking experience may feel very similar. Both banks and credit unions commonly offer online banking, mobile apps, debit cards, loans, savings accounts, and financial services. You can learn more about the Northwoods Credit Union difference and how we truly serve communities in Minnesota and Wisconsin here.
Are Credit Unions Safe?
Credit unions are highly regulated financial institutions.
Federally insured credit unions are backed by the National Credit Union Share Insurance Fund (NCUSIF), which is administered by the National Credit Union Administration. Eligible member deposits at federally insured credit unions are protected up to applicable insurance limits established by law.
Consumers should always verify whether a credit union is federally insured and review current insurance coverage guidelines before opening accounts.
Why Do People Choose a Credit Union in MN or WI?
People choose credit unions for many different reasons. Common factors may include:
Community Focus
Many credit unions have strong ties to the communities they serve and often participate in local events, financial education initiatives, and community development efforts.
Member Ownership
Members have a voice in the organization through voting rights and board elections.
Personalized Service
Many credit unions focus on relationship-based service and helping members navigate financial decisions.
Financial Products and Services
Credit unions typically offer:
- Checking accounts
- Savings accounts
- Money market accounts
- Certificates
- Auto loans
- Auto loan refinance
- Recreational vehicle loans
- Personal loans
- Mortgages
- Land loans
- Credit cards
- Online banking
- Mobile banking
- Youth savings accounts
Available products, rates, terms, and eligibility requirements vary by institution. Explore all of our options on our site today*.
Who Can Join a Credit Union?
Unlike many banks, credit unions generally have membership eligibility requirements, often referred to as a “field of membership.”
Eligibility may be based on:
- Where you live
- Where you work
- Family relationships
- School attendance
- Organizational affiliations
- Community residency
Each credit union establishes its own membership criteria based on its charter. To view NCU’s, click here.
Benefits of Joining a Credit Union
Potential benefits of joining a credit union may include:
- Member ownership
- Local decision-making
- Community involvement
- Access to financial education resources
- A cooperative business model
- A focus on serving members locally
- Better local loan rates
The specific benefits and services available depend on the individual credit union.
Frequently Asked Questions About Local Credit Unions
Is a credit union better than a bank?
The right choice depends on your financial needs, preferred services, convenience, rates, fees, and personal preferences. If you value local impact and personalized service, a credit union is the way to go.
Do credit unions offer online banking?
Most modern credit unions offer online banking, mobile banking, electronic bill pay, mobile check deposit, and other digital banking services.
Can I get a loan from a credit union?
Many credit unions offer various lending products, including auto loans, personal loans, mortgages, and recreational vehicle loans. Approval, rates, and terms depend on individual qualifications and underwriting criteria. Contact an NCU loan officer to learn more.
Do credit unions have ATMs?
Many credit unions participate in shared ATM networks, allowing members to access funds at thousands of locations nationwide. Each NCU branch has an ATM you can use.
Are credit unions federally insured?
Many credit unions are federally insured through the NCUA. Consumers should confirm insurance status directly with the institution. Some state-chartered credit unions are privately insured.
About Northwoods Credit Union
Northwoods Credit Union has been serving members in northeastern Minnesota since 1936. Founded to help local residents achieve their financial goals, the credit union has grown while maintaining its commitment to serving the communities where its members live and work.
Today, Northwoods Credit Union offers a full range of personal and business financial services, including checking accounts, savings accounts, loans, mortgages, online banking, and digital banking tools.
Northwoods Credit Union Locations
Northwoods Credit Union – Cloquet
Cloquet serves as the credit union’s headquarters and primary branch location. We have branches at Avenue B as well as Stanley Avenue in Cloquet.
Northwoods Credit Union – Moose Lake
Serving members throughout the Moose Lake area and surrounding communities.
Northwoods Credit Union – Floodwood
Providing financial services to members in Floodwood and nearby communities.
Northwoods Credit Union – Hinckley
Expanding service to members in Pine County and the surrounding region, coming fall 2026!
Learn More About Membership
If you’re interested in learning more about Northwoods Credit Union, membership eligibility, or available financial services, click here or visit your nearest NCU location.
The Credit Union Difference
Understanding what a credit union is can help you make informed decisions about where to manage your finances. Credit unions are member-owned financial cooperatives that provide many of the same services as banks while operating under a different ownership structure.
Whether you’re looking for a checking account, savings account, auto loan, mortgage, or other financial services, comparing multiple institutions can help you find the option that best fits your needs and financial goals.
*Membership eligibility required. Not all applicants will qualify. NCU is insured by NCUA.