Can you believe that credit unions have been around for almost 200 years? And yet, as a young adult, I must admit I didn’t even know what a credit union was prior to applying for a teller position at a little credit union in small-town America. Joining a credit union, both as an employee and as a member, turned out to be one of the best decisions I ever made personally and professionally. Yet sadly, there are many, like my younger self, that do not understand how credit unions work, who can join, and what the incredible benefits of membership are.
Credit unions are similar to banks in that they provide all the necessary financial products and services like deposit accounts, auto and home loans, mobile banking, and lines of credit. Credit unions, however, are completely different from banks in that they are not-for-profit. Credit unions do not serve investors— they serve their accountholders, called members. Simply by being a member, a person who opens an account with a credit union is an owner of the credit union. Furthermore, credit unions are not led by a group of paid board members whose interest is to increase profits. Rather, they are led by a volunteer board made up of member-owners of the credit union who represent a wide-array of demographics. This leadership style ensures credit unions focus on reinvesting in their members by keeping fees and cost of borrowing low, while also keeping deposit interest rates high.
So who exactly can join a credit union? The answer to this question is entirely dependent on each credit union’s “field of membership”. In early credit union times, eligibility was typically exclusive to certain groups, like employers, churches, branches of the military, and so on. Nowadays credit union membership (depending on the credit union) is often community-based, meaning anyone who lives, works, worships, or attends school within a certain area is eligible to join. This shift has made credit union membership more accessible. Good news, right?
Credit unions are also focused on ethical outcomes of community financial improvement. As cooperative financial institutions, all credit unions are guided by eight cooperative principles. And as a cooperative, credit unions believe that working together is key to serving the greater good. The eight principles include:
- Voluntary and Open Membership. First, credit unions must maintain voluntary and open membership. Access to financial mobility should be for everyone. Though there are various types of credit unions—community or select employer groups to name a few—each must allow membership within their field of membership without discrimination.
- Democratic Member Control. Financial democracy is a strong, central theme to credit unions and it starts here. As a member, everyone has a voice. Members have an opportunity to vote and elect who represents them on the board of directors. Members therefore have an equal opportunity in setting policies and making decisions that directly benefit them.
- Member Economic Participation. A principle central to how they operate, member economic participation demands that capital directly contributes to the member-owner’s financial success. Members realize benefits in proportion to their relationship with their credit union—the more they use the credit unions products and services, the more they financially benefit through cost savings or higher yields.
- Autonomy and Independence. As member-owners, autonomy and independence ensure that each decision is made with the member-owner in mind, not investors.
- Education, Training, and Information. Whether it’s to improve the knowledge of employees to provide better financial guidance or to educate members about budgeting, financial planning, or investing, information is a necessary component of operating on ethical standards.
- Cooperation Among Cooperatives. The sixth principle (if we’re still counting) is strategic in nature. National banks are expansive and consume an incredible amount of resources to stay competitive. Knowing this, national, state, and local-level credit unions have all teamed up to combine resources and networks, giving members access to credit union benefits no matter which credit union they visit. A specific benefit from this practice is access to the 30,000 surcharge-free ATMs nationwide and shared-branch networks. To give an idea of how extensive that shared ATM network is, JPMorgan Chase, the largest bank in the United States, has 16,000 ATMs (according to its own website).
- Concern for the Community. This principle involves efforts to improve the communities credit unions serve. While focusing on member needs, credit unions also work for the sustainable development of their communities, including people of modest means, through policies developed and embraced by the members.
- Diversity, Equity, and Inclusion. This final cooperative principle was added in 2019. Diversity, equity, and inclusion encourages credit unions to take a leader role in building and serving increasingly diverse people and neighborhoods, and ensuring that access to financial services is inclusive.
Whether you decide to join a local, employer group, or national credit union, it’s a good feeling to know they all operate under the same guiding principles with benefitting you top of mind. Democratic control of your financial institution is a powerful concept that’s been around for a long time. While some big banks may get caught up in Wall Street scandals or costly bailouts, credit unions rise above and continue to maintain a clear focus on serving member-owners and their communities. As I enthusiastically say, you can’t go wrong by being a credit union member!
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Excite Credit Union is a small, community-based cooperative that only serves two major markets, San Jose, California and Wilmington, North Carolina. As a nonprofit that is fully owned by the membership, Excite Credit Union is often able to offer lower rates and fees than most competing financial institutions, in addition to providing access to 30,000 fee-free ATMs. Choosing Excite Credit Union as a financial partner ensures access to loans and credit cards with lower fees, savings products with higher returns and a positive impact on the local community.