Credit unions, on the other hand, are not-for-profit institutions. Technically, credit unions are owned by their account holders, known as members
. Any profit earned by a credit union is either invested back into the organization or paid out to members as a dividend [source: Federal Reserve
]. As a not-for-profit institution, credit unions pay no state or federal taxes, meaning they can charge lower interest rates than banks for most financial services.
Credit unions were designed to be cooperative financial institutions
for people who share a common bond. Members of a credit union may work for the same company or organization, attend the same college, serve in the armed forces, belong to the same church or live in the same community. Credit unions have become more popular in recent years. Nearly 90 million Americans are members of a credit union, and credit unions hold more than $615 billion in savings. Worldwide, there are more than 46,000 credit unions with about 172 million members [source: WOCCU
But the growth of credit unions has met strong resistance from the banking industry, which sees these not-for-profit agencies as unfair competition. In 1998, the U.S. Supreme Court handed a victory to the banks, saying that some credit unions had signed on members with no common bonds in an attempt to increase their size and power [source: New York Times