Credit Unions vs. Banks
Mar 02, 2016 01:38PM
● By Becky Coburn
Credit Unions vs Banks
From the beginning, the credit union movement has provided hope during times of extreme upheaval and economic depression. Credit unions started around the middle of the 19th century. The Industrial Revolution was in full swing when people were living in a feudal system tied to an agrarian structure. Banks were for the rich only, and because people had few options, they were ready prey for loan sharks.
The confusion caused by these growth pains was responsible for a time of tremendous suffering in Europe. Plague, famine, and hopelessness ran rampant, with no adequate relief structure in sight. Meanwhile, banks continued to flourish.
People discovered that by banding together they could help each other, so they formed credit societies organized on the principals of the co-op. These early organizations, over time, were called cooperative credit, credit societies, people’s banks and, finally, credit unions. From the beginning, they have been based on the four rules of the co-op:
1) It is owned and controlled by its members.
2) Services to members are based on relationship to the co-op, rather than just the profit that can be made off of them.
3) Cost is less because no revenue goes to stockholders, therefore, dividends on deposits can be higher, and loan prices can be lower.
4) Credit unions exist to serve their members and can often be more innovative in providing financial services.
In America, The National Credit Union Act was passed in 1934 to help the country dig out from the Great Depression, while the banking industry was still in some disarray.
While it is true that credit unions conduct banking transactions and can look very “bank like,” the similarities are superficial. The credit union is a not for profit organization and has a purely volunteer board of directors. This affects not only the cost structure but also strategic planning and management decisions. In other words, credit unions and banks may look similar, but they act very different.
Today, credit unions serve people on a worldwide scale. Our mantra, “People Helping People,” is as alive today as it was over 100 years ago.
Call SWSFCU today at 925.228.4545 or
visit us online at www.SWSFCU.org
1700 Pacheco Blvd. | Martinez, CA 94553
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