How a credit union makes money if they don’t invest out your money like banks do.
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[edit] They don’t make profit. Credit unions are non-profits in general, they act as a savings bank for people and then when loans are taken out they use the small amount of interest to cover costs. They’re usually small and limited to a community or workforce.
I work for a credit union. As another has said they are non profit so they don’t “make money” in the sense of profit. However there are costs such as paying people, buying supplies, and paying for electricity, etc.
We make money in that sense by charging interest on loans and working with other partners like insurance partners, investment patterns, etc. there are tons of other ways too such as interchange from debit/credit cards too.
The bread and butter though is loan interest, so when you pay interest on your car, the amount of money that would be profit from that finds its way back into the credit union somehow such as building a new branch or replacing materials instead of being profit at the end of the day.
If you deposit $16 in a bank, they can loan out $100
If you deposit $16 in a credit union they can loan out $16
However they are usually like a amazon partner store. the checks you write to pay your bills that are through Happy Valley CU are processed BIG MEGA BANK with your CU just getting a cut of the action. Big bank gets to loan out more money on the deposits and that means your CU can ‘borrow’ more to loan to its members to buy a house/car.
when I was a kid, banks had rows of desks with clerks taking the checks from merchant deposits to debiting/crediting and putting that check you wrote into a file drawer for your monthly statement, now its all electronic. a local credit union can’t do that. typically your deposit slips have a different routing number from your checks…that’s how you know.
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