Dakota Plains Federal Newsletter | Volume 1, Issue 1, 2012

What it means to be a member.

At the credit union, we always stress the term “Member”, instead of :Customer”; why is that? The answer, though simple,really gets to the issue of why a credit union is  different from a bank. Both types of institutions exist to serve the financial needs of their patrons. The biggest single difference is the BOTTOM LINE. Banks are for-profit organizations that exist to channel profits back to a group of stockholders. Unless you own stock in the bank, you do not get the benefit of sharing in the banks’ financial success.

Credit unions are not-for-profit financial institutions. We exist to serve the people
who are the depositors in the credit union . That’s why we refer to your deposit as a
“Share” because you own an equal part of the success of the credit union. When you
borrow from the credit union you are, in effect, borrowing from your friends and

Back to the “not-for-profit” designation. Credit unions serve a closed group of people – in our case people who live, work or worship in 15 South Dakota and 5 North Dakota counties – but most credit unions serve smaller groups, like city employees, or employees of a certain company, etc. Banks are free to serve anyone who walks through the door. Some people are confused with the “not-for-profit” label; it is not the same as non-profit (which is generally reserved for charitable organizations). Not-for-profit really defines our tax status under the Federal Credit Union Act of 1934 as a tax exempt organization. As such, we are exempt from most federal and state taxes relative to the income generated by the credit union. That income – in the form of dividends paid to our members – is taxed at the individual level. The credit union does pay other taxes like city/country property taxes on our branches, federal payroll taxes, road use taxes on our vehicle, among others. The notfor- profit designation also defines our business model. Since (unlike a bank) profit is not the prime focus of the business, we can generally offer our services to members at a reduced rate. Profits generated over and above the cost of providing the services to the members are held in Retained Earnings. These retained earnings build up over time and become “Capital” , (Continue Reading Newsletter).