Credit Unions: A Good Place "To Place" Monies...
What’s a credit union? According to Jeff Blyskal in the book The Consumer Reports Money Book, “A credit union is essentially a nonprofit financial cooperative that offers its members many, if not most, of the services provided by banks. In theory, because credit unions are operated for the sole benefit of their members and have relatively low overhead expenses, both loan rates and savings interest rates should be more attractive than those offered by profit-making financial institutions. ” In other words, by providing credit at reasonable rates—and other pertinent financial services to its members—credit unions tend to promote thrift. Many credit unions exist solely for this reason. In order to further community development, the appeal of credit unions (especially in a hostile commercial banking environment) is something that shouldn't be overlooked.
This said, one of the most attractive features of credit unions is its ability to handle small transactions: this is especially important as America suffers from one of the worst savings rates in its economic history. Because credit unions are intimately tied to the local community from where it sits, there exist a kind of neighborhood link between themselves and its customers. As long as the cooperative is relatively small and is managed by members of the group, credit unions can keep their cost low and past on this benefit to its members—while big commercial banks can’t.
When I opened my first savings account with a local credit union that catered to the oil & gas sector of my community, immediately, I noticed the difference in service from commercial banks. First, one of the main problems with commercial banks was the screening process. Vaguely, I remember wanting to get a small automobile loan but my credit score wasn’t high enough—do to insufficient credit (no stuff, I was only 18 years old at the time.) It didn’t seem to matter that I had well over the amount of the requested loan in my savings account. Because the commercial bank screening process was based solely on personal credit, I—like millions of Americans—didn’t feel any personal connection with the institution. With credit unions, it’s just the opposite: most of its loans seemed to be based on criteria other than an objective credit score—i.e., collateral and, of course, the character of the individual. Immediately upon noticing this difference, I switched funds from that commercial bank into a local community credit union. After being able to convince the credit union loan officer that I had the right character it took to receive a car loan; and more importantly, collateral to repay it, I was able to get a much needed $4000.00 signature loan to purchase my first automobile. Since that moment I've been a strong advocate for credit unions--and I'm an even stronger advocate now given the dire economic conditions.
Also, unlike commercial banks, credit unions aren’t organized, purely for profit concerns and typically require members to purchase shares. The funds procured from these shares are then loaned to members. Additional share capital may be collected from borrowers by withholding small portions of their loans. Commercial bank and credit unions both serve the public as being financial intermediaries— that is, they both collect monies from investors (savers) and then parcel these monies out to companies or individuals. Alas, the economic caveat with commercial banks—in an illogical monetary policy environment—is what it has allowed itself to become: for better or worse credit unions haven’t “sold out” the American people for the quick buck.
Nevertheless, with today’s technologies, more Americans are discovering the advantages of using credit unions. According to the Credit Union National Association, “credit unions are a better financial environment;” below is a list of features associated with credit unions:
·* The dollar amount of credit union first time mortgage originations grew by 35% in 2009. This was at a time when mortgage losses have forced other lenders to scale back or close their doors entirely. Why? For one thing, credit unions operate more conservatively and have high asset quality and high capital ratios.
*· Credit unions are member-owned and not-for-profit cooperatives. We exist to serve our members, not profit from them. Unlike the banks and brokers, we’re not out to force loans on our members just to make a quick buck.
*· Today 59% of credit unions offer first mortgages, and 90% of the nation’s 90 million credit union members belong to one of the credit unions that offer first mortgage loans.
In conclusion, October 20, 2011 officially stands as International Credit Union Day. What this important date also represents is a reminder to the American people of just how powerful the free market based capitalistic system really is: the very idea that commercial banks over the decades have been tainted by the Fed’s illogical monetary policies has added immense value to notion of joining one of these “not-for-profit” corporations. Judicious Americans are slowly learning to circumvent the adage that one must place monies inside a commercial lending institution for the betterment of the macro-economy. Fact is, monies placed inside of a savings account at a local credit union beget an overall stable economic environment. Americans have learned overtime—and are currently learning—they have to find stable financial intermediaries to place monies into. Collectively, if we’re ever going to get out of this financial rut, we’re genuinely going to need a place that we trust that’s out to help us. And although no financial institution is immune from the grips of a sluggish economy, credit unions, indeed, do serve as viable polar alternatives to a crumbling commercial banking sector.
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