Credit Unions vs. Banks
What's a Credit Union All About? A Brief History of Credit Unions in the United StatesThe first credit union in the United States was established in Manchester, New Hampshire in 1909. That same year, the Massachusetts Credit Union Act became law, which served as the model for subsequent state credit union laws and the Federal Credit Union Act.
In 1934, the Federal Credit Union Act became law and allowed credit unions to be organized anywhere in the United States under either state or federal law. The Federal Credit Union Act also established the Bureau of Federal Credit Unions to oversee federal credit unions.
In 1970, the Bureau of Federal Credit Unions became an independent federal agency with the establishment of the National Credit Union Administration (NCUA). This year also marked the creation of the National Credit Union Share Insurance Fund (NCUSIF). The NCUSIF was fully capitalized by credit unions without the use of federal tax dollars and designed to protect credit union deposits against loss.
Today, there are more than 85 million credit union members in the United States, with deposits worth over $520 billion. Credit unions continue to operate as member-owned, not-for-profit financial cooperatives that are democratically governed by a volunteer member-elected board of directors.
USA Fed seeks to shine more light on the credit union movement and the factors that distinguish our credit union from our competitors with
Project Differentiation.
The Credit Union Difference Not-for-profit, not for charity, but for service.Credit unions are not-for-profit financial cooperatives, owned by the people who save and borrow there. Every member has the right to vote on policies and for members of the credit union board of directors. In fact, the majority of credit union boards are made up of volunteer members.
Unlike most other financial institutions, credit unions do not issue stock or pay dividends to outside stockholders. Instead, earnings are returned to our members in the form of lower loan rates, higher interest on deposits, and lower fees.
By current federal statute, credit unions cannot serve the general public. People qualify for credit union membership through their employer, organizational affiliations like churches or social groups, or community charters.
Critics often claim that credit unions “don’t pay taxes.” Credit unions do pay taxes – payroll taxes, sales taxes, and property taxes. Congress exempts credit unions from federal income taxes. The exemption was established in 1937, affirmed by statute in 1951, and re-affirmed in 1998 in H.R. 1151, the Credit Union Membership Access Act, which states:
"Credit unions, unlike many other participants in the financial services market, are exempt from Federal and most State taxes because credit unions are member-owned, democratically operated, not-for-profit organizations generally managed by volunteer boards of directors and because they have the specified mission of meeting the credit and savings needs of consumers, especially persons of modest means."USA Fed provides basic financial services including share drafts (checking) share accounts (savings), loans and mortgages – but we do much more. Some of our unique services include:
Our Commitment to Serving Our Members — We Make the DifferenceCredit unions exist to help people, not make a profit. Our goal is to serve all of our members well, including those of modest means. The average annual income for members of our credit union is $45,000. In addition, we also reach out to members and potential members who are unserved or underserved by offering programs such as:
- Interest-free loan assistance to victims of the San Diego Firestors
- Hispanic community outreach
- Small deposit saver programs
- No minimum Share Draft accounts
- Low opening deposit – USA Fed members can open an account for $5 and all members have access to our full range of financial services regardless of deposit balance
Our Commitment to Financial Education & LiteracyPromoting financial literacy has been a primary mission of credit unions since they were established. Edward A. Filene, the father of the American credit union movement in 1908 said, “Credit unions are educational institutions.” Our intent is to teach people wise money management skills they can use to improve their lives.
Credit unions routinely offer budget and financial counseling.
For example, USA Fed offers:
- Seminars on home buying, improving credit scores, buying a car, and financial literacy to military personnel (stateside and overseas) and high school students
- Free financial counseling to members
Our Commitment to Good Governance and Diversity Credit unions exist to serve all members equally, with dignity, respect and consideration. We strive to serve everyone who needs financial services within our membership and to be sensitive to the individual needs of the various cultures we serve. USA Fed’s employees and volunteers reflect the diversity of our members.
- Our Board of Directors and Supervisory Committees are comprised of many active and retired military personnel.
- We hire bilingual staff to serve our diverse communities.
Our Commitment to Community & the Credit Union MovementCredit unions don’t just exist to provide financial services—we provide financial services for the purpose of improving lives. While our first responsibility is to our members, part of being a cooperative movement means looking beyond our walls to the larger community. This philosophy leads us to support worthwhile charitable and social causes, and to collaborate with other credit unions to increase community support.
USA Fed’s community outreach includes:
Visit the
Credit Union National Association (CUNA) web site to learn more about the credit union movement.
