Credit Unions and you
What is a Credit Union?
Many people save their money in a credit union. These people usually have something in common, such as their place of work.
You and other members put your money into savings accounts, which are called share accounts. This money is then given to other members as a loan; these members will pay an extra amount of money called interest. Then you and the other members will get paid extra money from the credit union for letting it use your money. The extra money that you will earn in your share account is called dividends.
The credit union's main purpose is to give member owners the best banking services. South Carolina Federal Credit Union thinks that it has chosen a not so impossible mission.
Who can become a member of South Carolina Federal Credit Union?
If you live, work, worship, or attend school in the following counties, you are eligible for membership at S.C. Federal:
Berkeley County
Calhoun County
Charleston County
Clarendon County
Dorchester County
Georgetown County
Orangeburg County
Certain areas of Richland & Lexington Counties
"Once you are a Member, you are always a Member."
How is interest earned on your account?
South Carolina Federal Credit Union pays you extra money for keeping the money you save in your account. This extra money is called "dividends." The amount of dividends your account earns determines how quickly your money grows.
1. Rate of earned interest = 3% (this rate is only an example)
$100 in 1 year will grow to $103.03
$100 in 2 years will grow to $106.16
$100 in 10 years will grow to $131.85
Rate of earned interest = 5.45% (this rate is only an example)
$100 in 1 year will grow to $105.56
$100 in 2 years will grow to $111.43
$100 in 10 years will grow to $171.83
2. The more money you deposit (put in your account), the more money in dividends you will earn. For instance, see the difference in your earnings if you deposit $100 or $500 at 3% earned interest. (P.S. Members who deposit money in their credit union are called shareholders because they actually own a share of the credit union.)
At the end of 1 year your $100 earned $3.03 in dividends
At the end of 1 year $500 earned $15.17 in dividends
How Credit Unions Can Pay Dividends
When a member wants to borrow money to buy a car or house or other big items, they go to South Carolina Federal Credit Union for a loan. A loan is an amount of money given to the member for a certain amount of time. It will have to be paid back to South Carolina Federal Credit Union along with an extra amount of money. This extra amount of money is known as interest. The amount of interest asked from members is higher than the amount of dividends paid to the members. The money a credit union has left over after paying dividends to shareholders is the credit union's money to pay expenses**.
The example below helps to explain how credit unions can pay you dividends and earn money, too.
| It's as simple as 1 - 2- 3 | |
| 1. Johnny A. Member deposits | $100 |
| Interest rate | 2.5% |
| 2. Suzy Q. Member takes out a loan | |
| Principal* | $80 |
| Interest rate | 10% |
| Time to repay | 1 year |
| 3. One year later | |
| Johnny A. Member's savings account | |
| Money on deposit | $100 |
| Interest @ 2.5% | $5 |
| Total in account | $105 |
| Johnny earns dividends | |
| Suzy Q. Member has paid in full | |
| Principal | $80 |
| Interest at 10% | $8 |
| Total to be paid | $88 |
| Suzy pays interest and South Carolina Federal Credit Union earns money to pay expenses | |
| Interest received from loan | $8 |
| Dividends paid to share holder | $5 |
| The amount that pays expenses | $3 |
**Expenses are: salary to employees, supplies, etc.
*The principle is the amount of the loan without the interest added.
The examples above were calculated in simple interest.
