Credit union philosophy vs. a banks’ is quite different. Here are some things to think about.
The philosophies of credit unions and banks are quite different. Banks are in business to make money off of their customers’ money. Banks charge high interest rates and a slew of miscellaneous fees. They are all about profits and bottom lines which is certainly not true with a credit union. A credit union’s basic motto is “not for profit,
not for charity, but for service.”
This basic tenet was adopted during the Great Depression in the early 1930’s when individuals had to band together in order to weather some difficult economic circumstances. This is not so different from the financial necessities and banking climate of today. The Cooperative Alliances Committee of CUNA (Credit Union National Association) came up with seven principles to demonstrate their philosophy:
1) Membership is voluntary: In order to become an account holder, one must be a member of this financial organization. All members are included regardless of age, religion, gender or political leanings. Segments of society such as labor unions or occupational classifications often join together to form one.
2) Control by Democratic Membership: Each member has a vote in the goings on at their local CU. This is the democratic way to handle a financial institution or any other organization.
3) Economic Participation: Each member participates economically in order to help themselves and each other. They are owners and are in control rather than the profit driven shareholders and CEOs of a traditional bank.
4) Autonomous and Independent: Each credit union is an autonomous and independently run financial organization. The members have a role in how the place is run, interest rates charged and capitalization as well as investments.
5) Information, Training and Education: Because these are service organizations, they serve their community by offering information, training and education regarding all matters that are financial. Budget seminars, investment classes and personal finance 101 are all on an agenda of educational possibilities.
6) Cooperative Cooperatives: These co-ops work together with other co-ops in their community in order to become stronger. United fronts have more power politically and in other ways. Many separately owned CUs band together with other state and national organizations in order to further serve their group.
7) Communal Concern: These institutions are not just out for themselves but rather for the good of their communities. Caring for each other, banding together to provide a safe and fair financial institution is a goal.
Credit unions were formed in Europe in the 1800’s and spread to the United States of America in early 1900’s. The original European models were designed to support and protect the average working man or woman from loan sharks. This is still true day. Look around at banks folding, mortgage companies being caught in unsavory business practices and PayDay loans’ scandalous behavior and it will be clear about the philosophical differences. The CU was designed to serve and protect as the motto “not for profit, not for charity, but for service” states. This was true during the 1800’s in Europe, in the 1900’s in America and in the 2000’s today.
