Which of the following is NOT considered a characteristic of credit unions?

Which of the following is NOT considered a characteristic of credit unions?

• A. Member-owned
• B. Profit distribution
• C. Non-profit
• D. Community-focused

Answer: (B)

The correct answer is that profit distribution is not considered a characteristic of credit unions. Credit unions operate on a not-for-profit basis, which means their primary focus is not to generate profit for shareholders like traditional banks, but rather to serve their members. Any surplus earnings they generate are typically reinvested into the credit union or returned to members in the form of lower fees, better interest rates, or other benefits. In contrast to for-profit financial institutions, credit unions are owned and governed by their members, emphasizing a strong community and member-focused approach. This ownership structure fosters a sense of cooperation and mutual support, further differentiating credit unions from traditional banks. By being non-profit and community-focused, credit unions aim to enhance the financial well-being of their members rather than distributing profits to external shareholders.

The correct answer is that profit distribution is not considered a characteristic of credit unions. Credit unions operate on a not-for-profit basis, which means their primary focus is not to generate profit for shareholders like traditional banks, but rather to serve their members. Any surplus earnings they generate are typically reinvested into the credit union or returned to members in the form of lower fees, better interest rates, or other benefits.

In contrast to for-profit financial institutions, credit unions are owned and governed by their members, emphasizing a strong community and member-focused approach. This ownership structure fosters a sense of cooperation and mutual support, further differentiating credit unions from traditional banks. By being non-profit and community-focused, credit unions aim to enhance the financial well-being of their members rather than distributing profits to external shareholders.