feb 2015

FINANCE
ARE CREDIT UNIONS FOR YOU? By Sandra Spence
How are they
different
from banks?
While the two entities
provide financial services
for the community, there
are fundamental differences
in philosophy and
the way they affect
your pocketbook.
Credit unions are a viable alternative to
banks. Although credit unions have been
in America since the 1850s, the majority of
Americans knows nothing about them. Walk
into a credit union and a bank branch, and it’s
hard to tell the difference. Both are likely to
have drive thru windows, vaults and a teller
counter with polite employees. Credit unions
and banks are similar because both provide
financial services to the public, have deposit
insurance so your money is safe, and are government
regulated.
But this is where the similarity ends for the
most part. While the two entities provide
financial services for the community, there are
fundamental differences in philosophy and
the way they affect your pocketbook. Here
are some of the more outstanding differences:
PROFIT vs. NOT-FOR-PROFIT: Banks
are profit-driven institutions, which pay
dividends to stockholders and interest to
their account holders. Credit unions are notfor-profit
and return their earnings to their
members. What does this mean? It means
that these profits are returned to credit union
members directly in terms of higher returns
on investments, lower fees and rates on loans,
and higher interest and lower fees on deposits.
OWNERSHIP: Banks are owned by their
stockholders. Credit unions are owned by
their members. Each member has an equal
say in the institution regardless of how much
money they have on deposit. With local ownership
and management, credit unions are
generally more flexible in their loan decision
process.
CUSTOMER SERVICE: Banks are usually
large regional entities with many employees
who do not know their customers. The smaller
size of a credit union means better service to
its members who are generally well known by
employees at the credit union’s branches.
BOARD MEMBERS: Credit unions are
governed by a volunteer board of directors,
elected by and from the organization’s membership.
Large banks usually have a board of
trustees, who represent the interests of their
stockholders.
FINANCIAL EDUCATION: Credit
unions assist their members and customers
to become better-educated consumers of
financial services. They do this with readily
available online resources, group seminars
and one-to-one counseling. Banks do not
emphasize financial education.
SOCIAL WORKS: The primary goal of
banks is to create profits and maximize the
bottom line. Social work in the community
is a distant secondary aim at best. The goal of
every credit union is to serve all their members
well, including those of modest means.
This people-first philosophy drives credit
unions and their employees to get involved in
community charitable activities and worthwhile
causes.
The Credit Union National Association
(CUNA) estimated that Florida credit unions
provided $366 million in direct financial benefits
to the state’s 4.7 million members during
the twelve months ending in June 2014.
These are not mere statistics. They translate
into real benefits for real people. Financing a
$25,000 new car for 60 months at a Florida
credit union, for example, will save members
an average of $192 per year in interest
expense compared to what they would pay at
a banking institution in the state.
For the consumer seeking a low cost alternative
to banks, credit unions might provide a
solution. The vast majority of credit unions
are now open to the public. Credit unions
work for their members who benefit from
lower loan rates, higher returns on deposits,
little or no fees and excellent customer
service. Socially conscious consumers can
also feel good about joining a credit union
since these organizations pride themselves
on serving their communities with financial
education and charitable works. P
Sandra Spence is the Vice President of
Advertising and Public Relations at We Florida
Financial Credit Union in Broward County.
the PARKLANDER 103