All About Credit Unions

All About Credit Unions | Financial Education

Learn about the alternative to banks.  Credit unions have been around for a very long time but often misunderstood.


Introduction

In this short seminar, you’ll quickly learn about the financial cooperative movement, credit union products and services,  and the benefits of membership.  Gain a better understanding of the differences between credit unions and bank. You’ll also learn where to search and join a credit union and easy ways to find a credit union branch or ATM and other ways to access your accounts.


 To “promote thrift and thwart usury.”

Credit Union Act signed in 1934 by President Franklin Roosevelt


The History of Credit Unions

Credit Union History Timeline

Credit unions has its roots in Germany starting from 1849.  In, 1909, the first US credit union, St. Mary’s Cooperative Association was establish in Manchester, NH. Credit unions became widely adopted after President Franklin Roosevelt signed into law the FCU Act in 1934 which established federally chartered credit unions in all states. In 1970 the NCUA (National Credit Union Administration) was formed to supervise credit unions.  The National Credit Union Share Insurance Fund (NCUSIF) was created and administered by the NCUA and backed by the “full faith and credit of the United States Government.”


How common are credit unions?

There are currently 6,800 credit unions nationwide with over 100 million members.  Credit unions hold over $1 trillion in assets.


“Not for profit, not for charity but for service.”


What is a credit union?

• are not-for-profit organizations

• require membership eligibility

• serve members rather than to maximize corporate profits

• accept deposits and make loans

• offer savings and loans at reasonable rates

• return surplus income to their members in the form of dividends

• regulated by the NCUA a federal agency


Why are credit unions not-for-profit?

Credit unions are exempt from federal taxes but pay other types of taxes.  They are required to invest earnings back into the organization. In 1934, Congress passed the Federal Credit Union Act and in it the words, “Federal credit unions and their income shall be exempt from all taxation.” It’s this tax exemption that requires credit unions to be not-for-profit institutions.


What types of credit unions exist?

There are many types of credit unions and each fall into one of these specific categories.

Local

Usually known as community credit unions, local credit unions serve individuals within a specified community. You must live, work or worship in a particular area in order to join a community credit union.

Group

Your affiliation with a particular association can make you eligible to join. These group focused credit unions include military, church groups, alumni associations, or service organizations.

Employer

The credit unions that fall in this category serve a particular company or group of companies. You must be a current employee of a company to join, belong to a organized union (e.g. teachers, police officers, government workers etc) or in some cases retired from a company.

Federal

These credit unions serve a larger group of individuals and joining one doesn’t have as many limitations as the others described. Most credit unions that fall into this category serve a national audience.


What’s the difference? 

Credit Unions versus Banks


Benefits of Belonging

• Higher interest rates on deposits

• Low or no minimum balances for deposit accounts

• Low or no fees on savings and checking accounts

• Lower interest rates on loans and credit cards.

• Profits shared in the form of dividends

• Multi-generational accounts

• A focus on financial education

*Ask your credit union for specific benefits, products and services.


What Banking Services are Offered?

Deposit accounts

– Savings accounts (called share accounts)

– Checking accounts (called share draft accounts)

– Money Market accounts

– Certificates (CDs) also known as share certificates

– Club accounts (such as vacation, holiday or tax)

– Individual Retirement Accounts (IRA)

Consumer loans

– Personal loans and lines of credit

– Student loans and lines of credit

– Debt consolidation loans

Auto loans

– New/used and refinance loans

Boat/Recreational Vehicle loans

Home loans

– Mortgage

– Rental and Vacation homes

– Home Equity loans and lines of credit


Are My Deposits Federally Insured?

National Credit Union Administration (NCUA) is the independent agency that administers the National Credit Union Share Insurance Fund (NCUSIF). Similar to the FDIC’s Deposit Insurance Fund, the NCUSIF is a federal insurance fund backed by the full faith and credit of the United States government.

• Deposits at federally insured credit unions are insured up to $250,000 per individual depositor.

• Federally insured credit unions must prominently display the official NCUA insurance sign at all locations accepting deposits and on their websites.

Calculate your deposit insurance by using the NCUA Share Insurance Estimator – Calculate – http://www.mycreditunion.gov/estimator


Are Credit Union Credit Cards a Better Choice?

Some features of credit union credit cards include:

• Pay less with lower interest rates and lower fees.

• No penalty APR. Many credit unions do not set a penalty APR on their credit cards in the event you miss a payment.

• Same APR for purchases and cash advances. Draw on your credit card and transfer funds into other accounts.

• Access to cash via ATM.

• Lower or no fees for balance transfers.

• Overdraft protection. Many CUs let you connect your credit card to your checking account to avoid overdraft charges.

*Ask your credit union for specific benefits of using their credit cards.


What Additional Services are Offered?

Credit unions offer additional services through CUSOs (Credit Union Service Organizations). CUSOs are corporate entities owned jointly by several credit unions to provide services they are unable to provide individually such as:

– Mortgages

– Investment and Brokerage Services

– Insurance Plans

– Tax Preparation

– Student Loans

– Financial Counseling

– Business Loans


Credit Unions are Convenient.


How to Access Accounts and Services?

Services

• Direct Deposit

• Check cashing

• Wire transfers

• Online bill payments

• Mobile deposits

• Email/text alerts Access

• Online banking

• Mobile apps

• ATM/Debit cards


Shared Branches and ATM Access

Shared Branch

A national network of credit unions around the country that share facilities.  They give members access to over 5,000 convenient locations and perform transactions as if you were at your credit union

+ Find a CO-OP Shared Branch

Surcharge-free ATM

Surcharge-free ATM Access is available for members whose credit union belonging to the CO-OP Network.  The CO-OP surcharge-free ATM network consists of 30,000+ ATMs where members using the ATMs will not incur a fee from the ATM owner.

Additionally, some credit unions are part of a larger ATM network that can extend surcharge-free ATM access up to 65,000 nationwide. Search surcharge-free ATMs:

CO-OP

CU24

AllPoint

*Ask your credit union about your specific shared branch and ATM access.


“Once a member, always a member.”


How to Find and Join a Credit Union

You’re eligible to join a credit union if you belong to an organization, association or work for an employer, live/work/worship in a particular area. Having a family member who holds credit union membership is another way to be eligible for credit union membership.

Ask a family member, employer, human resource manager, group leader or pastor about credit union benefits.

Search online to find and join a credit union:

MyCreditUnion.gov

aSmarterChoice.org


Important Credit Union Related Websites

Search and Locate

– Search for a credit unionwww.asmarterchoice.org

– Find a shared branchwww.sharedbranching.org

– Find a surcharge-free CO-OP ATMwww.co-opcreditunions.org

– Find a credit union credit cardwww.creditcardconnection.org

– Find student loanswww.cuStudentLoans.org/phroogal

Government Resources

MyCreditUnion.govwww.mycreditunion.gov

NCUAwww.NCUA.gov

Share Insurance Estimatorwww.mycreditunion.gov/estimator

Credit union discounts www.lovemycreditunion.org

Financial calculatorswww.culookup.com/calculators

Movement and Initiatives

100 Million Members – www.americascreditunions.org

Don’t Tax My Credit Union – www.donttaxmycreditunion.org

Credit Union for Kidswww.cu4kids.org

Credit Unions Around the World – www.woccu.org


Are Credit Unions better than banks? (Yes or No)


Phroogal Answer

Have a credit union as part of your financial portfolio. Include credit unions when comparing banking products and loans for lower fees and better interest rates.

Note: Although credit unions share a fundamental belief in people helping people, not all credit unions are equal nor operate the same.  Always do your research, ask questions and decide on the best credit union that meets your financial needs.