What do bread and credit unions have in common? The financial institutions have their roots in a cooperative bread mill and bakery that began in Germany in 1846. The cooperative notion of meeting the need for bread at reasonable costs for its members was over time used to address the need for loans by members. The business model eventually spread to the U.S.

These financial institutions offer the same products and services as banks, but they’re not-for-profit organizations. As a result, they tend to offer better rates and lower fees on deposit accounts.

Here’s a closer look at how credit unions work.

Credit unions focus on helping members succeed financially. They’re owned by members who vote and elect a volunteer board of directors.

Unlike banks, credit unions have membership requirements based on where you live, work or worship, or through associations or causes that you’re involved with. Some requirements are easier to meet than others. If you qualify, usually you pay a one-time membership fee and a deposit of up to $25.

At credit unions, the profits cycle back to members through educational programs, low fees, better rates on loans and higher rates on savings. One member’s money can become another member’s loan for a house, car or business.

» MORE: NerdWallet’s best credit unions

» MORE: Credit unions vs. banks

The products and services at credit unions are similar to those found at banks, but some terminology is different. Here’s a little 101: “share draft accounts” are checking accounts, “share accounts” are savings accounts and “par value” is the minimum opening deposit.

Deposits at federally chartered credit unions are insured by the National Credit Union Share Insurance Fund, which protects money the same way the Federal Deposit Insurance Corp. insures banks in case of failure. Members’ deposits are insured up to $250,000 per ownership category.

With the help of financial services technology by the CO-OP organization, members can access their money through a network of about 30,000 ATMs — some of which include low fees internationally — and 5,000 shared branches.

Even with technological support, some credit unions may lag behind in the latest online or mobile banking technology. Customer service is one of their strengths. For the past five years, they have ranked higher than banks in this category, according to the American Customer Service Index.

State-chartered credit unions are privately insured and are not backed by the full faith and credit of the U.S. government as federally chartered credit unions are.

There are 5,954 federally insured credit unions with over 103 million members. To find out whether your deposits are federally insured, visit the National Credit Union Administration’s credit union locator.

» MORE: How to choose a credit union

If you’re going to need a loan for a car or a home, a credit union may be a good option. You don’t have to quit your bank to join one; a credit union and a bank can complement each other well and meet your various banking needs. Before choosing a credit union, consider factors such as rates, fees and proximity.

Melissa Lambarena is a staff writer at NerdWallet, a personal finance website. Email: mlambarena@nerdwallet.com. Twitter: @LissaLambarena.

The article What Is a Credit Union? originally appeared on NerdWallet.