What Credit Unions Are and Why People Love Them
So here's a fun fact, which also happens to be the reason I’m writing this blog: International Credit Union (ICU) Day comes every year on the third Thursday of October (October 18 in 2018). It’s a big day for credit unions and this year (2018), the theme is “Find Your Platinum Lining.” If you’re wondering why they're messing with your silver lining, but they have a good reason. This is the platinum (70th) anniversary of ICU day, which started in 1948 and has been celebrated on the third Thursday of October since then.
So Wait. What is a credit union?
A credit union is very much like a bank. It offers the same types of products and services that a bank offers, like savings and checking accounts, loans, IRAs, CDs, money market accounts, you name it. And they are federally insured (by NCUA—the National Credit Union Association).
Are you a VSECU member? Or would you like to be? Stop by one of our nine branch locations on October 18 to celebrate ICU Day with us. Each branch will offer seasonal snacks and other activities.
One of the main differences between a bank and a credit union is that a bank has customers and a credit union has members. In fact, members can accurately be described as member-OWNERS of the credit union because they actually own a share of the financial cooperative, which is what a credit union is at its core.
Cooperatives have been around since 1844 and the first credit union was started in 1862 in Germany, to allow farmers to become interdependent, thereby saving them from having to mortgage their property in order to purchase cattle. It began as an “association” and grew rapidly to become a “credit society,” from which farmers could borrow money at a lower rate. By borrowing at a lower rate from others in their local industry, the farmers were able to support each other in building their business and their wealth.
As a member-owner, you have the power to get involved in leading the credit union by volunteering as a member of the Board of Directors. Directors are traditionally elected by the membership annually and must go through an application, selection, and voting process. Once in office, they have the power to provide direction and exert control over the affairs of the credit union, and provide direction for the CEO.
Credit unions run on a “people helping people” philosophy and they are founded on seven cooperative principles, which I won’t make you hunt for. Here they are:
- Voluntary membership
- Democratic member control
- Member economic participation
- Autonomy and independence
- Financial education, training, and information
- Cooperation among cooperatives
- Concern for the community
If you want to read about them more in-depth, click here.
These principles ensure that credit unions remains true to their members, facilitating the growth of their overall membership the economic health of their communities.
So, what do people love them so much?
All of these things are great, but what most people truly love about their credit union is that it keeps their money local. In other words, when you deposit money into your credit union, it is used to fund the loans of other members. When that member pays interest on their loan, their interest payment is pooled with other interest funds and you receive interest income on your savings. The rest of the pooled funds are pushed back to you through lower fees and higher returns. It’s also pushed out to the community in the form of donations to non-profits and financial literacy events.
By recirculating money (wealth) in the community, credit unions help local communities thrive. That has always been their purpose, since the first farmers borrowed from other locals to purchase cattle. They function with an abundance mentality, in which cooperation allows everyone to prosper.
As a credit union and a member of the Global Alliance for Banking on Values, VSECU is a values-based financial cooperative. Not sure what that means? This infographic should help.
About Heidi White
Heidi White is the content and communications specialist at VSECU. She is responsible for communicating information and ideas through the written word for the credit union’s internal and external audiences. Her passion is helping people live more joyful lives through timely, useful, and compelling content. Heidi lives in Barre, Vermont.