Learn More about Credit Unions

When you want to start saving for the children’s college fund or take out a loan for a new home or the holiday, you don’t have to run to the banks right away. Another option worth considering is credit unions.


What is a credit union?

A credit union is a financial cooperative. It can be set up by anyone, usually members who share a common interest or belong to another common organization, such as a company, community, or church. These members pool their financial resources or “invest” in the credit union. In turn, they can then take advantage of the union’s services such as savings, loans, credit cards and mortgages.

Credit unions have been around since the 19th century. They were first introduced in the 1850s by the German Franz Hermann Schulze-Delitzsch. They were later adopted by other European countries such as the Netherlands, Austria, Italy, and France. In 1901, the first credit union in North America began in Quebec, Canada. Members only needed to put in 10 cents into the financial pool. In the United States, the first credit union was St. Mary’s Bank, which operated in Manchester, New Hampshire.

Although the ownership structure of credit unions is different from other financial institutions such as banks, they are still a regulated industry. In 1934, this regulation started with the Credit Union National Extension Bureau. Subsequently, the Federal Credit Union Act was enacted, which assisted in the immense growth of these unions in different parts of the country. Across the country it is estimated that credit unions have over 90 million members.


Benefits of a Credit Union

The credit unions provide a number of benefits to their members that institutions such banks cannot provide. Set out are a number of these benefits worth considering next time you are looking at savings or borrowings on offer.

1. It serves the interest of its members. Credit unions often claim they are more community oriented; while banks are often cited as being at the mercy of the stockholders’ decisions, whose goal, naturally, is to gain a good return for their investment rather then caring about the customer or other members. Whereas for credit unions there is a stronger convergence between members and customers’ interests as they are often one and the same. Members want a good customer service from their credit union while also wanting an appropriate return on their investment. Having an interest in both provides a unique combination that some say ensures a more stable business model, particularly during difficult times.


2. Members enjoy better rates. Based on the ownership structures already mentioned, banks are often compelled to charge higher interest rates to their clients for similar products, where as credit unions are not as driven by the bottom-line result for shareholders. This use to be counted by banks having access to much greater financial resources, however credit unions now control over $825 billion in assets across the country.


3. Members have more control. The credit unions are primarily controlled by the members themselves. Being member-centric, the main goal is to provide assistance to those who need their financial services rather than a sole financial return focus. In the meantime, if the union earns a proper return, this can be returned to members through dividends and bonuses.


Top Five Credit Unions

There are hundreds of credit unions all over the country, with many of them now multibillion dollar businesses. Due to their size and more prudent financial lending practices they are often perceived as being more stable than the banks and so has seen their popularity rise over the last few years of these turbulent financial times.

The five largest credit unions in the country, by membership, are listed below. This list provides you with a feel of the different areas from which these unions arose and the range of products and services that are offered.


Navy Federal Credit Union

The Navy Federal Credit Union is based in Merrifield, Virginia, and already has more than three million members. It is open to men and women who serve in the army, Marine Corps, navy, air force, Department of Defense, as well as their families. Some of their popular financial services are money market deposits, certificates of deposit, scan deposits, motorcycle and boat collateral, and other credit union loans. Members can open an active duty checking account and obtain VA mortgages.


State Employees Credit Union

The State Employees Credit Union was founded in Raleigh, North Carolina. It already has over a million members, mostly state employees and their families. Aside from free checking accounts, members can apply for auto and home loans, insurance products, investments and trusts and credit cards.


Pentagon Federal Credit Union

Organizations and individuals who work in the Pentagon can join the credit union, which is found in Alexandria, Virginia. Its total membership is around 860,000. The cooperative was chartered in 1935 and is open to members who are also living outside the country.

Besides credit union credit cards, the organization also extends to its members home mortgages, auto loans and home equity refinancing packages.


The Golden 1 Credit Union

The Golden 1 Credit Union serves those who live in 34 of the 58 counties in California (check the website for a complete list of the counties) and has almost 700,000 members. The services may also be taken advantage of by the family members of those who are qualified to join. Once a member, you can apply for investments, insurance protection, financial workshops, estate planning, mortgages, checking accounts, savings including IRAs and a variety of loans.


Security Service Federal Credit Union

The last of the top five credit unions is currently based in San Antonio, Texas, with almost 682,000 members, and is open to Security Service employees and organizations. It provides CDS, savings and checking accounts, credit and debit cards, mortgages, investment products, insurance and business loans. Like many credit unions around the country Security Service Federal Credit Union also has a number of scholarships members may apply for.