A credit union is a non-profit corporation owned and operated by its members, who must have some common interest, and who agree to save money together, and to make loans to each other for worthy purposes. It was originally designed as a mutual aid fund with social as well as economic objectives. 

The credit union idea began in 1849 in Germany as an answer to the famine that gripped the southern part of the country at that time. In 1900 the first credit union in North America was started at Levis, Quebec, by Alphonse Desjardins, who obtained his idea from the successful European credit unions. In 1909 the first credit union was established in the United States.

At the end of 1961, there were 4,697 credit unions in Canada with 2,751,059 members. These unions had $818 million on deposit and about $525 million of loans outstanding. The deposits in credit unions account for 13 per cent of the personal savings of Canadians and 12.4 per cent of their installment loans. The average savings in the credit unions are over $400 per person.

Some of the unions have over $5,000,000 in assets, while about 1 in 5 have less than $10,000. Quebec province, where credit unions are known as Caisses Populaires or Peoples' Banks, has within its borders about half the total assets and half the total membership of credit unions in Canada. The credit union idea has spread so rapidly because it has shown itself to be a very effective way of encouraging saving and a relatively inexpensive way of borrowing.

Credit unions are always organised by the members of a particular group such as those who work in a factory, belong to a labour union, worship at a particular church, or live in a small community. In Canada at the end of 1961 the small community was the common bond of 35 percent of the credit unions. Most of these small communities were in fishing or farming areas.

Sixteen per cent of the credit unions were organised with urban communities as their bond and another 33 per cent based on occupational groups. The other 16 per cent had a variety of common bonds, including churches, and educational institutions. The credit union is democratic, and all officials are elected by its members. Collection is sometimes made by a volunteer collector, sometimes by payroll deductions, and sometimes by deposits made at the credit union office, in a member's home, in some public place, or at the place of work. From these deposits, loans are made to any member for any sound purpose..

Credit unions come under provincial regulation in Canada and are easily incorporated by contacting the appropriate provincial office. The office will supply officials to help organise the credit union, and literature to educate the potential members. Once the credit union is organised, joining is a simple matter. The member pays entrance fee of 25 cents and then buys as many shares or part shares as he can afford. A share normally costs $5 but deposits of as little as 25 cents are acceptable. Subject to the right of the individual credit union to request notice of withdrawal, the member may take out all his money whenever he wishes. Credit unions vary in their dividend-paying policy, but those that pay them frequently pay from 2 to 5 per cent. It is by means of these dividends that the profits of the credit union are returned to the members. Various types of insurance are available to credit union members. One type of insurance covers the loans of members so that their estates do not have to repay them in case of death. Another type pays the family of the deceased the amount of the member's deposit at death, plus the deposit itself. Various kinds of life insurance are also often available.

The main advantage of the credit union as a savings facility is that there is a great social pressure on the members to save. All members recognise that they are saving for mutual aid, since most of them need to borrow money at some time. Most of the members usually save fairly regularly, and if the credit union has a volunteer to collect contributions, members get a tap on the shoulder each payday as the collector asks them for their savings contribution. Another important advantage is that saving entitles the member to borrow for most family purposes. All officers are bonded so that the assets of the union are protected in case of theft by one of them. Interest is often higher than that obtainable at a commercial bank but lower than that of finance companies. Inexpensive insurance is usually available.

The disadvantages of the credit union as a savings facility are that only the very big ones have chequing facilities, and that the depositors' borrowing and saving programs are known to one or more elected officials of the credit union. The individual's affairs are thus somewhat more public than they would be if he used a large public institution.

Clearly the credit union is an ideal form of saving small sums of money, especially for those who usually have difficulty in saving.