Throughout the month of June, the Tennessee Credit Union League has spent the past couple of weeks celebrating 91 years of the Federal Credit Union Act by discussing the history of credit unions and the philosophy of credit unions—two areas of importance when articulating the evolution of a century-old movement. This week, as we close out this month-long celebration, we would like to take a moment to consider the credit union difference, another area of importance that highlights the significance of our unique institutions among a vast financial landscape.
When talking about the the credit union difference, it would be remiss not to refer to the origin and philosophy of credit unions. As mentioned in the last two newsletters, credit unions emerged as a solution to an increasing need to provide hardworking people with access to loans at a reasonable rate for everyday needs, further resulting in the “People Helping People” philosophy. Even after a hundred years later, the need for credit unions is just as evident as before, as our financial cooperatives offer a “different” type of service that consumers find a tad bit more attractive and appealing.
Meeting the needs of more than 140 million people nationwide, credit unions are unlike other financial institutions. Yes, we accept deposits, make loans and provide an array of financial services just like banks, but there are so many other defining features that set us apart, such as the below:
The Credit Union Difference
Difference #1: Credit unions are not for profit.
Credit unions are financial cooperatives, meaning each member is also an equal owner. While for-profit institutions exist to generate a profit for a small number of private stockholders, credit unions return their earnings to its members in the form of better rates, fewer and lower fees, and additional services.
Difference #2: Credit unions are member-owned and governed by volunteer boards.
Credit unions are owned by its members, who have equal ownership and an equal voice in electing its board of directors, which is comprised of members who volunteer their time to set strategic direction and policies for the institution.
Difference #3: Credit unions have members and defined fields of membership.
Members of credit unions are consumers and business owners, who join in order to benefit from its services. Contrary to banks, credit unions serve members within a distinct field of membership, including specific communities or employees of a company.
Difference #4: Credit union deposits are federally insured.
Deposits in most credit unions are insured to at least $250,000 by the National Credit Union Association, meaning credit union deposits are insured to the same level of federal insurance offered by banks and is backed by the full faith of the U.S. government.
Difference #5: Credit unions follow a set of governing principles.
Established by the Credit Union National Association and the National Credit Union Foundation, credit unions across the country follow eight cooperative principals, which act as their foundation and explanation for functioning.
Difference #6: Credit unions are involved in the community.
Credit unions are all about giving back to its members and the communities they serve as seen through its outreach efforts, including involvement in charities and financial literacy initiatives.
At first glance, many may think there’s not much difference between a traditional bank and a credit union, but that is further from the truth. As financial cooperatives, the sole purpose of credit unions is to benefit our members by offering the best products and services that fit our consumers’ needs through fair rates, fewer fees and greater service. In the end, credits aren’t about banking, “we’re about people” — striving to improve the lives of our members and to make a difference in our communities. This is the credit union difference.
