Answer: Credit unions are cooperative financial institutions that exist to serve their members and communities. Because they are member-owned, credit unions are not driven to turn a large profit for a select group of stockholders. This directly affects the way credit unions do business. They can afford to charge lower fees and offer less profitable services like loans for small amounts to all their members. And, credit union members benefit through low rates for borrowing, high rates for savings, and (in some cases) receive a dividend payment at the end of the year.
While their not-for-profit status means that credit unions pay no corporate taxes on their earnings, they do pay property and payroll taxes. And, credit union members also pay state and federal taxes on any dividend they earn.
The banking industry has always complained that credit unions’ tax exemption provides an unfair competitive advantage. This complaint lacks depth for a number of reasons.