If you’re wondering what credit unions are and want to know everything about them, then you’ve come to the right place!
Investopedia defines a credit union as, “a member-owned financial co-operative that is created and operated by its’ members and profits are shared amongst the owners.” Credit unions are similar to banks in the sense that they offer many of the same financial services, as well as have access to checking and saving accounts, CDs, loan products, and credit cards.
Credit unions differ from larger banks in two specific ways:
Credit Unions are not-for-profit. Their purpose is not to maximize profits, but rather to serve their community through funding projects and services that will benefit the community and the interest of its members. As a nonprofit, they can offer higher interest rates in saving accounts and CDs, and lower interest rates on loan products and credit cards.
They are member-focused. Credit unions are cooperative, which means they are owned and operated by its’ members. Each member has one vote in electing board members no matter how much money they have on deposit.
How to Join:
To join a credit union, you must meet their membership requirements that differ based on the credit union’s goal. Their requirements might be as specific as only accepting teachers from a specific school district, or as relaxed as accepting members that live in a certain area. Credit unions have a history for providing excellent member service and committing to helping members improve their financial situations.
Advantages of a Credit Union:
Higher Interest Rates- They pay higher interest rates on deposit accounts that are 4 to 10 times higher than the amount you would receive from a commercial bank.
Lower Loan & Credit Card Rates- Credit Unions offer the same financial products that traditional banks do, but at a better price. People usually turn to their local credit unions when purchasing a car because commercial banks are normally a percentage or two higher than credit unions.
Lower Fees- Credit unions have fewer fees compared to national banks. For example, many credit unions do not charge customers for checks, withdrawals, and electronic transactions.
Customer Focused Banking- A credit union’s membership structure allows its’ members to have equal vote in any decision made by the credit union, and work to serve one another, instead of making profits like traditional banks.
Better Customer Service- Credit Unions offer fast and personal service.
More Flexibility- Credit Unions are more willing to work with the average person that may have had a troubled financial past.
A Brief History:
Credit Unions date back to 1852, when Franz Hermann Schulze-Delitzsch established the first two credit unions in Germany. He set the foundation for future credit unions and established that they have to have the following features: democratic governance, each member has a vote, member-elected board of directors, and volunteer based. They didn’t come to America until over half a century later, and now have spread worldwide. The first credit union in the United States was St. Mary’s Bank Credit Union in Manchester, New Hampshire. They have become so popular that Federal Credit Unions were created, which despite their name, are not government operated but follow federal regulations rather than state regulations.
Technological challenges credit unions are facing and how Zikher can help:
Credit Unions have significantly evolved, but still have to make some major changes if they want to stay competitive in the banking industry. Advances in technology have presented credit unions with numerous challenges that they must tackle to match up to consumer expectations. They need to leverage digital banking to satisfy the customer’s need for a digital experience. Paxson states, “They need to create a personalized, human-centered experience for members that is intelligently integrated and delivers the speed consumers today expect.” Credit unions need technological innovation, but at a price that doesn’t break their budget. This is where Zikher can help credit unions keep pace with consumer expectations and large corporate banks. Our online banking platform helps credit unions keep pace with technological advances in the banking industry, without these banks having to pay high prices. Zikher’s model is revolutionary because the loan application is entirely online and is substantially quicker than the current paper-based process. With simple and affordable implementation, Zikher can take credit unions into the future of banking.
Author : Whitney Besser
“A Brief History of credit Unions.” National Credit Union Administration. N.p., 28 Aug. 2015. Web. 7 Mar. 2017. <https://www.ncua.gov/About/Pages/history.aspx>.
Colley, Angela. “Credit Unions vs. Banks – Differences, Pros & Cons.” N.p., n.d. Web. 07 Mar. 2017. <http://www.moneycrashers.com/why-credit-unions-are-better-than-banks/>.
Paxson, Samantha. “Top Trends Shaping the Future of the Credit Union Industry.” Insight Vault. N.p., 04 Jan. 2016. Web. 07 Mar. 2017. <http://blog.co-opfs.org/looking-ahead-to-2016-credit-union-industry-experts-weigh-in-on-todays-top-trends/>.
Staff, Investopedia. “Credit Union.” N.p., 02 Nov. 2015. Web. 07 Mar. 2017. <http://www.investopedia.com/terms/c/creditunion.asp>.