On Oct. 20, credit unions worldwide celebrate the credit union movement with International Credit Union (ICU) Day. The day focuses on celebrating and raising awareness of the work credit unions and financial cooperatives do to help people around the world achieve their financial goals.
Credit unions are not-for-profit financial cooperatives owned by their members. Every credit union account holder is a partial owner and can participate in the institution’s governance. The credit union movement first began in Germany in the mid-1800s, and these financial institutions have provided financial services across the United States for more than a century. Still, many misconceptions remain about credit unions and the services they offer — even among members who belong to them.
According to the Credit Union National Association (CUNA), 25% of credit union members don’t realize they are member-owners — not “customers” — of their financial institution and what that entails. Also, roughly 2 out of 5 consumers don’t believe they are even eligible to become credit union members.
Because credit unions are not for profit, their earnings are invested back into the membership, rather than paid to shareholders. Credit unions use their earnings to keep interest rates and fees low, provide innovative mobile and online services, staff brick-and-mortar branches, offer free financial education and guidance resources for their members, and so much more.
In honor of ICU Day, here are five commonly misunderstood credit union myths explained:
Each credit union has its own membership requirements — some open membership to everyone while others exclusively serve people of certain organizations (businesses, military, religions, etc.) and their family members. Most credit unions lie somewhere on a spectrum between the two. In fact, you likely already qualify for membership with a credit union based on your relationship with a current member, where you live, your place of work, the college you attended or your membership or volunteer status with several popular organizations.
Credit unions provide more than just personal checking and savings. They can also help you get into a new home or car, invest in retirement, maximize savings, reduce debt load and a lot more. These not-for-profit financial institutions exist for the benefit of their members and provide tools to help people reach their financial goals, tailoring product suggestions to your specific situation.
Another benefit of this member focus is credit unions’ ability to offer non-traditional loan structures and services tailored to their memberships’ needs. For example, a credit union may offer special certificates to help members save for the holidays or provide free in-house financial counseling services.
This is a common misconception. As the Small Business Administration noted, credit unions are increasingly important financial partners for businesses, particularly small businesses. They can help you secure funding to start or grow a business, process payroll and finance your customers’ purchases. In fact, credit unions played a vital role in distributing Payroll Protection Program (PPP) loans at the start of the COVID-19 pandemic. From March 2020 to the program’s end in May 2021, credit unions collectively facilitated 361,980 PPP loans worth a total of $15.1 billion, which supported 199,598 jobs.
Banks and credit unions are both government-insured, just through different organizations. While the Federal Deposit Insurance Corporation (FDIC) backs banks, all federal credit unions and most state-chartered credit unions are insured through the National Credit Union Association (NCUA). As Experian points out, the coverage FDIC and NCUA provide are practically identical. NCUA also serves as the governing body that regulates federal credit unions, and they are subject to the same consumer protection and reserve regulations as banks.
Data shows that despite an increase in reliance on online and mobile banking services, consumers still value having access to physical branches. Larger credit unions boast expansive branch networks in the regions they serve, and smaller credit unions often make up the deficit by banding together and participating in shared branching programs. Most regional credit unions also contract with ATM networks that have international reach, so cash is always at hand, no matter where you travel.
Also, credit unions continue to grow their networks — a trend that shows no signs of reversing. The same rings true in rural areas, where community members are historically underbanked. Since 2004, credit unions have opened 1,500 branches in these areas, while banks closed more than 4,700 rural locations in that same time frame.
— Tim Toy is a vice president of member service at Mountain America Credit Union overseeing branches in Idaho, Montana and Utah.