Do you know what a credit union is? If you don't, maybe you should.

Millions of Americans are turning to credit unions as a banking alternative, because credit unions help consumers both save money and borrow at low interest rates.Credit unions are cooperatively owned financial institutions that are "smaller in size, individualized, and generally more democratic than banks," explained Bob Schafer, assistant regional director for the National Credit Union Administration (NCUA), a federal regulatory agency of the nation's credit unions.

Although they are often small in size, credit unions are big business. With over $194 billion in assets, 14,175 state and federal credit unions are helping 58 million Americans both save and borrow money, according to the Credit Union National Association (CUNA), a trade organization.

Traditionally the main consumer attraction for credit unions was the higher-than-average interest rates paid on savings and lower-than-average interest rates charged for loans. Although banks now offer rates that are becoming more competitive, credit unions still have unique benefits.

"Chances are greater for a better consumer deal in credit unions," said Suzanne Hoffman, spokesperson for the Ohio Credit Union Association. "We are non-profit, so everything is returned to the consumer at some point. Servicing the members is the key concern."

Credit unions are chartered to offer members savings and investment plans, consumer loans, individual retirement accounts (IRAs), and more recently, Guaranteed Student Loans (GSL) and real estate mortgages.

As interest rates on credit cards continue to climb, credit unions consistently offer their members loan rates that are anywhere from "1 to 3 points" below the national average, said Hoffman.

The differences between state and federal credit unions are slight. Savings at most of the 9,312 state-chartered credit unions and all of the 4,863 federally chartered institutions are insured up to $100,000 by Uncle Sam. However, state credit unions may offer additional private insurance as well as the federal coverage.

Shareholders in federally chartered credit unions are protected in other ways besides federal deposit insurance. Reserves must be set aside for uncollectable loans, the treasurer must be bonded and records must be regularly audited.

During 1987, the federal credit unions paid approximately $9.5 billion in dividends to their shareholder members. Although the dividend rate will vary according to the individual credit union, the average annual dividend rate paid on all types of accounts was 6.0 percent.

Loans are made to credit union members out of funds accumulated from savings. The organization's board of directors, which is elected by the members, has the authority to fix loan limits and interest rates.

Company employees are attracted to credit unions for a variety of reasons. Some like the convenience of payroll deductions for savings deposits and loan payments. Young workers say the credit union gives them an easy way to establish a credit history.

"Most credit unions care about a person's character and their willingness to repay rather than their initial ability to do so, although they will make sure that you're not a serious credit risk," Hoffman said.

Credit unions are not a recent occurence. They started in Germany in the 1840s, and the movement began in the United States when the first credit union law was passed in Massachusetts in 1909.

The Federal Credit Union Act, which was passed in 1934, provides regulations for setting up and supervising federally chartered organizations. It was amended in 1982 as part of the deregulation of the financial industry.

Prior to 1982, the NCUA required that credit union members have a "tight bond," such as employment by a company or membership in a trade union. Although the number of credit unions has not increased since this requirement was relaxed, membership has grown by 11 million.