How do they work?

How do they work

Credit unions and building societies are  financial cooperatives that encourage savings and aim to educate their customers to enhance their social and economic well-being. Once overheads and other expenses are paid, any income is returned to customers in the form of interest on savings, increased reserves and improved or additional services.

What’s the difference between a credit union and a building society?
Credit unions are registered under the Friendly Societies and Credit Unions Act 1982 and are not registered banks. They are locally owned by their customers, not-for-profit and are a trusted alternative to banks. Members are able to both save and borrow at competitive rates of interest and with a sensible approach to fees and other charges.

A mutual building society is similar to a credit union, they are also member owned financial co-operatives and exist to meet the needs of their members and benefit the collective. The difference between a credit union and building society is that building societies are governed by the Building Societies Act 1965.

Being 100% New Zealand-owned and operated, both credit unions and mutual building societies, members' funds are retained in New Zealand and are not used to fund any offshore investments.

Under the Securities Act 1978, credit unions and building societies are subject to a regulatory regime, where an independent trustee company acts as their prudential supervisor.

Credit union deposits are shares secured by a first ranking registered Trust Deed. Credit unions and building societies are also regulated by the Reserve Bank of New Zealand as non-bank deposit takers. This provides an additional layer of protection and comfort that each credit union is being strictly regulated and their performance monitored.

Credit Unions are:
Building Societies are:
reporting structure of credit unions reporting structure building society
registered under the Friendly Societies and Credit Unions Act 1982 registered under the Building Societies Act 1965
an independent trustee company acts as Prudential Supervisor an independent trustee company acts as Prudential Supervisor

regulated by the Reserve Bank of New Zealand as non-bank deposit takers    

regulated by the Reserve Bank of New Zealand as non-bank deposit takers

During and since the Global Financial Crisis, not a single credit union member has lost funds with a credit union or building society in New Zealand as a result of the crisis, nor did any of the Member credit unions or building societies of NZACU require a government bailout.

The International Credit Union Principles are the foundation for how credit unions differ from other financial institutions. The principles provide frameworks for credit union operations, governance, safety and soundness.

> Six good reasons to join a credit union or mutual building society