Primerica General Practice Exam

A credit union is best described as a nonprofit cooperative owned by its members. This definition highlights the fundamental characteristics of credit unions, which operate to serve their members rather than to generate profit for shareholders.

In a credit union, members pool their savings together to provide loans to each other and benefit from competitive interest rates on savings and loans. Because credit unions are nonprofit, any profits made are typically returned to members in the form of lower fees and better rates.

This cooperative structure is distinct from for-profit financial institutions, which prioritize profit generation for their owners or shareholders, and from government-backed entities, which usually pertain to specific forms of insurance or government banking services, not necessarily related to member ownership. Additionally, a multinational banking organization suggests a business model focused on global profit generation, differing fundamentally from the community-oriented mission of credit unions.