Many of these credit unions, like the State Employees Credit Union, have multiple branches, providing similar accessibility to larger banks while maintaining the personal service and commitment to community members.
Credit unions look a lot like banks and serve many of the same functions. What makes a credit union a credit union is it's structure and intent.
Credit unions are not-for-profit institutions that are created and exist in order to serve their members. They are owned and governed by their members, who serve as volunteer board members.
There are no outside investors or shareholders, and all of the money in credit unions is the money that members invest into it. Meaning the funds that credit unions use to lend to members is made up of money that other members have deposited into checking, savings, money market or other deposit accounts.
There are seven guiding principles of credit unions.
- Voluntary and open membership. Credit unions do require membership, but most people are eligible, and all people who are eligible for a credit union’s membership are accepted.
- Democratic member control. Members are all equal and each has one vote in credit union operations.
- Member economic participation. Since funds are "shared," the more people who participate and invest in the credit union, the more all members benefit.
- Autonomy and independence. Credit union members elect union board members. There is no outside or top-down influence or control of union management.
- Education, training and information. Financial literacy is a priority of credit unions. They provide seminars, financial education opportunities and counseling.
- Cooperation among cooperatives. Credit unions work together on a regional and national scale in order to improve services to members and provide consistency among unions and communities.
- Concern for community. Local ownership means credit unions want to invest in local communities and businesses.
In general, credit unions offer better rates than banks. How? Since credit unions are not-for-profit, any profits earned by the institution go back to the members through lower loan interest rates and higher rates of return.
For example, according to the National Credit Union Administration, in June 2014, the average rate of a 5-year auto loan from a bank was 4.88 percent, compared to a 2.74 percent interest rate from credit unions.
Jimmy Goodrum, a VP at the North Carolina State Employees Credit Union, sums up the "profit" sharing of public ownership, saying, "Since credit unions owners and users are the same people, they typically receive their ‘dividend’ in the form of lower loan rates, higher deposit rates and lower or fewer fees for financial services."
Credit union funds are insured by the NCUA, which provides coverage on deposits up to $250,000, and credit unions have proven to be far more stable than banks in recent history.
During the recession of 2008-2012, four times as many banks (465) folded as credit unions (124).
And, just because credit unions are smaller institutions doesn’t mean they are inconvenient or hard to find. Most credit unions also partner with ATM businesses and owners, as well as other credit unions around the country, to provide free ATM access nationwide.
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