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What is a Credit Union?
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Credit unions are non-profit cooperative financial institutions owned and controlled by the people who use its services. These members, usually composed of persons from the same group, community, company, or church, pool their money to save and borrow together at reasonable rates. In the United States alone there are more than 12,000 federal or state-chartered credit unions serving over 70 million members.
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Credit unions operate under a unique organizational structure, separating them from banks and other financial institutions. Since credit unions are owned by the members of the credit union, not by a remote body of shareholders, the volunteer board of directors is democratically elected by the membership. Each member is entitled to vote regardless of the amount of money on deposit with the credit union. This contrasts with the banking world where paid directors are voted in by the largest stockholders. Similarly, instead of generating large profits and distributing them to the stockholders as banks do, the credit union's profits are returned to members in the form of lower interest rates on loans, higher interest rates on savings accounts, and fewer service charges. Because credit unions are member oriented rather than profit oriented, decisions regarding financial assistance for members are usually based more on honesty, reliability, and the desire to repay, which often helps those who have been previously turned down. |
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History of Credit Unions
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The credit union concept originated during the mid-1800's when Friedrich Raiffeisen, the mayor of a small German farming community, organized a credit society to help his townspeople combat poverty. Following the existing principles of the cooperatives formed by Victor Aime Huber in Rochdale, England in 1844, Raiffeisen reasoned that members |
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could save their money together and make loans to each other at low interest rates to purchase livestock, equipment, seeds, and other farming needs. The borrowers character would be the primary security for the loan.
From these beginnings the cooperative movement spread throughout Europe. In the early 1900's the credit union idea crossed the Atlantic to Levis, Quebec with Alphonse Desjardins, a court reporter from Canada. With reasons the same as those in Germany 50 years before, Desjardins formed the first Canadian credit union to provide relief to the working class. Throughout the next eight years he went on to form many more credit unions, including St. Mary's Cooperative Credit Association, the first credit union in the United States, located in Manchester, New Hampshire.
Soon after, Edward A. Filene, a wealthy Boston merchant, grasped the credit union concept and became responsible for the rapid growth and support of credit unions in the United States. He spent over a million dollars of his own fortune and in 1921 formed the Credit Union National Extension Bureau for the sole purpose of promoting credit unions nationally. During the next 13 years the credit union movement grew dramatically.
By 1934, credit unions had become a powerful body among financial institutions and President Roosevelt passed the Federal Credit Union Act. This act, though amended many times is the basis on which all federal credit unions are formed. The government also formed the Credit Union National Association (CUNA) to further enhance and coordinate the activities of credit unions. Continuing to flourish and grow steadily throughout the '40's, '50's, and '60's, the National Credit Union Administration was organized to charter and supervise federal credit unions in 1970.
Over the years, credit unions have continued to evolve and keep pace with the changes in the products offered by financial institutions. Legislation has brought expanded services to credit union members, including share certificates, mortgage lending, low cost insurance products from the CUNA Mutual Insurance Society, and insured deposits up to $100,000 from the National Credit Union Share Insurance Fund (NCUSIF).
Today, the Credit Union System is one of the largest and strongest financial organizations in the nation. Holding true to the credit union motto "Not for Profit, Not for Charity, But For Service," credit unions have created a source of credit at fair and reasonable rates of interest. This has provided an opportunity for members to use and control their own money on a democratic basis in order to improve their economic and social condition. The credit union idea has grown to many millions of people and there is no limit to what the movement can achieve in terms of growth, service and most importantly, as an instrument of cooperation and harmony between people everywhere.
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How to Join a Credit Union
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Credit unions are for everyone, but the law places some limits on the people they may serve. A credit union's charter defines its "field of membership," which could be an employer, church, school, or community. Anyone working for an employer that sponsors a credit union, for example, is eligible to join that credit union.
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If you don't belong, here's how to find a credit union to join:
Call your state league.
A representative will tell you about credit unions in your area that you are eligible to join.
Ask your boss.
Your company may sponsor a credit union, or may be a select employee group (SEG) that has access to a credit union. Many employers offer direct deposit of payroll to your credit union.
Poll your family.
Does your spouse's employer sponsor a credit union? Most credit unions allow credit union members' families to join. Each credit union, however, may define "family" differently. At some, only members of your immediate family are eligible. At other credit unions, family may include extended family members such as cousins, uncles and aunts.
Quiz the neighbors.
Some credit unions have a "community" field of membership, serving a region defined by geography rather than by employment or some other association. Ask friends in the community if they know of a credit union you may join.
Read the yellow pages.
Some credit unions rarely advertise, so you might not know about them unless you look them up. A yellow page display ad may state a credit union's field of membership. If not, at least you'll know what number to call to ask about membership eligibility.
Call CUNA.
The Credit Union National Association can help you find a credit union by calling now. You'll hear an electronic message that includes the name and telephone number of a person at the credit union league in your state who can help you find a credit union to join.
If you would like to gather more information on the credit union movement check out our credit union links page.
The information on this page was reproduced from excerpts found on the CUNA and NCUA web sites.
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