How a Credit Union works

How does a credit union work?

Credit Unions look after your money for you so you don't have to keep it in a jar under your bed! Putting your money into your credit union keeps it safe AND you will earn interest on your savings.

What is interest?

Interest is money credit unions pay you for saving your money. The more money you save, the more interest you earn!

How do credit unions make money?

Credit Unions lend money to people so they can buy things like a new car, then the person pays the credit union back the amount they borrowed, plus a little bit extra - this is called interest.

Pretend you borrowed $20 from a credit union. You get the $20 right away. When it is time to pay back the credit union, you will be charged $5 in interest for borrowing the money, so you will pay back $25 in total.

Credit unions don't charge a lot of interest however, because they are a not-for-profit businesses. That means that instead of trying to make heaps of money from letting people bank with them, they help out their members by giving them good interest rates on savings and not charging them lots of fees.

Where does the money people save go?

Credit Unions have bank accounts too! The money you save doesnt sit in a box, it gets put into a big savings account with everyone else's savings.

Credit Unions use the money people have saved with them to lend to other people - that's how credit unions can afford to pay you interest on your savings!

Without money from people like you, banks wouldn’t have any money to lend. That’s why banks will pay you interest.

Who works at a credit union?

When you walk in to a branch you will see friendly faces behind a desk - member services and lending officers. They help you withdraw and deposit money, get eftpos cards, apply for loans, set up automatic payments and more!

There are also administration people, managers, call centre operators and much more!

 

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