I’m sure you’ve heard about credit unions but still don’t understand what makes them unique. Credit unions are an integral part of the financial services industry, offering products and services to over 130 million people. In fact, credit unions are often the only avenue some people have to access banking and credit products.
Credit unions can play a role in your financial wellbeing. But, today, I want to share some interesting facts about these financial cooperatives that you might not be aware of.
Credit Unions have a long history
In 1934, President Roosevelt signed into law the Federal Credit Union Act. This established credit unions as an alternative to banks to promote thrift and prevent usury during the Great Depression. Many credit unions have decades of history with members spanning generations. The first credit union was founded in Manchester, New Hampshire, as St. Mary’s Cooperative Credit Association which opened on April 6, 1909.
Credit unions are not-for-profit financial cooperatives
Like other not-for-profit organizations, some credit unions enjoy federal tax exemptions allowing them to offer better rates on savings accounts, lower rates on loans, and little or no fees. Credit unions have this benefit because they are mutually operated without the purpose of profit. It’s important to understand that credit unions do pay other types of taxes, such as state, sales, and payroll taxes. They contribute taxes back into the community for which they serve.
Credit unions are democratically governed
This means you get a voice and elections are based on a one-member and one-vote philosophy. In contrast, banks are governed by paid directors who may or may not be shareholders and owned by investors with voting rights depending on the number of shares owned. As a credit union member, your participation is vital. Make your voice heard at your credit union by communicating and attending the annual member events.
Over 5,000 credit unions in the United States
Credit unions are highly regulated financial entities, and federally chartered credit unions are supervised by the NCUA. The National Credit Union Administration is the independent federal agency that regulates, charters, and supervises federal credit unions. State-chartered credit unions are regulated by the state for which they operate. Unfortunately, the number of credit unions is decreasing through mergers and, on rare occasions, failures.
Insured by NCUA up to $250,000
The National Credit Union Administration is backed in full faith and credit by the United States Government and administers the NCUA Insurance Fund. Not every credit union is insured or regulated by NCUA. Some state-chartered credit unions have private insurers for deposit protection. When in doubt, ask your credit union about deposit insurance.
Credit unions are convenient
The reality is that some credit unions haven’t caught up to the 20th century while we’re living in the 21st. But there are many credit unions that are giving the fintech startups a run for their venture-backed enterprises. Credit unions offer a wide array of convenient services including access to online and mobile banking, a shared branching network, and thousands of ATMs through the COOP ATM network.
Credit unions offer competitive interest rates
Credit unions are highly competitive when it comes to savings rates and interest rates on loans and credit cards. This is due to the lower cost of operations and the tax exemptions that allow them to invest profits back into the membership. When compared to big banks and other financial services companies, credit unions most often cannot be beaten when it comes to rates and lower fees.
Anyone can join a credit union
The myth persists that credit union membership is for the privileged few. In fact, the variety and number of credit unions that exist can mean an overlap of membership. This is good news: you’re eligible to join many credit unions. You can find a credit union through family members, a job, a church, an organization, or your residence. Find and join a credit union that aligns with your financial needs and values.
Once a member, always a member
Once you’ve joined a credit union, you’re a member for life. You can keep your credit union even if you move out of your city, leave a job, or change churches or associations. Once you’re a member, you can continue using the benefits. And with convenient services offered, it’s easier to keep the credit union relationship. As a member, you can help your immediate family members become members too.
Credit unions have member-owners
You’re not a customer or a guest of a credit union. With credit unions, you’re a member-owner and that means having more say in the operation of the cooperative. This is in contrast to big banks that have customers and shareholders (investors that own shares of a bank and don’t necessarily have any banking relationship).
What are your thoughts? Are you a member of a credit union? Good stories? Bad experiences? Share in the comments.