I have found myself lately having the same, or similar, conversations with different people of varying ages and very different walks of life. The topic has come up in various setting and when mentioning the term “credit union”, I have been asked:
Q. Isn’t a credit union the same as a savings and loan?
In this instance, the person thought that after the Savings and Loan crisis in 1989, in an effort to change public perception of the industry, they simply changed the name to credit union.
The answer is no. Credit unions are not-for-profit cooperatives, owned by their members.
Q. I’m not in a union, how can I join a credit union?
In this case, the person was thrown off by the word “union” and not belonging to a union, felt she was also unable to join a credit union.
Credit unions have what is called a field of membership (FOM). This limits members to specific group or groups of people, generally, but not always, based on where they work or live. It has nothing to do with a labor union, unless a labor union happens to be in that particular CUs FOM.
Q. Is my money safe in a credit union?
This question we get all the time at BauerFinancial. The National Credit Union Administration (NCUA) offers the same insurance limits and protection for credit union shares as the Federal Deposit Insurance Corp. (FDIC) does for bank deposits.
As it turns out, ****Affinity FCU, of Basking Ridge, NJ recently commissioned Harris Poll to conduct an online survey to determine exactly what types of misconceptions consumers have regarding credit unions. The results, which were made public on July 20th included:
- 45% of Americans believe that banks offer more products and services than CUs.
- Fewer than half of Americans believe CUs offer mortgages or online banking.
- 30% said it’s difficult to find a CU they are eligible to join (although, based on our own experience, the number may be higher).
Credit unions have a history spanning more than a century in the US (and longer in Europe). The first credit union in North America was organized in 1900 in Quebec to provide affordable credit to working class families in the area who otherwise may have turned to loan sharks charging exorbitant interest rates. In 1909, the concept came to the states as St. Mary’s Cooperative Credit Association opened its doors to Franco-American Catholics in Manchester, NH.
That same year, Edward Filene, a prominent Boston merchant and philanthropist, teamed up with the Massachusetts Banking Commissioner to get the Massachusetts Credit Union Act passed into law. That law became the basis for the Federal Credit Union Act which was signed by President Franklin Delano Roosevelt in 1934.
****Morris Shepard FCU, Texarkana, TX, became the first federally chartered credit union on October 1, 1934. It is still in operation today.
During the Depression years, a Senate report on how credit unions fared:
- “In the 38 states and the District of Columbia (where credit unions existed), there have been no involuntary liquidations.”
- “Their record for honest management is exceptional.”
- “They have proved their durability and have served their members uninterruptedly during the worst depression in our history.”
In 1970, with 12,000 credit unions serving nearly 12 million members, an independent agency to charter and supervise CUs was needed so Congress created the National Credit Union Administration.
It wasn’t until 1974 that credit unions were able to provide share drafts (i.e. checking accounts). Since then, credit unions have expanded their offerings to provide a wide variety of share (deposit) products as well as low-interest (generally) loans. While they may not have the vast branch networks that some banks have, they often have shared services enabling members to conduct business at a neighboring CU instead of their own.
While the credit union industry has had its ups and downs, it was a major benefactor of the anti-Big Bank sentiment that followed the Great Recession of 2008. By 2012, assets at federally-insured CUs surpassed $1 trillion for the first time, and they continue to grow both in size and popularity.
While not all CUs (or all banks) are created equal, they are certainly worth consideration. In fact, 358 have earned Bauer’s 5-Star rating for 100 consecutive quarters or more, earning them a Best of Bauer distinction. They are listed in this issue (page 7 + supplement).