Banking Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

The correct answer is that a credit union has customers that share a "common bond." Credit unions are member-owned financial cooperatives that provide a variety of banking services to their members, who are linked by a common characteristic. This common bond can be based on factors such as employment at a particular company, membership in a specific organization, or residency in a defined geographic area.

This structure allows credit unions to operate on a not-for-profit basis, often offering more favorable rates and fees as they return surplus earnings to their members rather than distributing profits to shareholders. The shared community or common bond is a fundamental aspect of credit unions, differentiating them from other types of financial institutions that do not require their customers to have any specific shared characteristic.

While commercial banks, mortgage companies, and savings banks serve a broader customer base without the same association requirement, they do not operate on the principle of a common bond. Therefore, the unique membership model of credit unions is what makes them distinct and highlights the importance of the common bond among their members.