With newfound independence in 1776, American citizens formed a community of people able to vote on policies and leaders they believed in, free from monarchies and oligarchies. They finally had a say in the future of their country and the people who ran the system.
This system is called democracy, the United States’ long standing political system of choice since the American Revolution, and it is very similar to the concept of a credit union.

Think of a credit union like the United States in 1776: The financial institution the citizens trust with their finances represents the political system in place in the country. While some political systems take as much wealth as possible, others circulate finances throughout the community based on the voice of the public. This is how credit union’s run; as member-owned, not-for-profit, community-driven organizations built by the people, for the people.

Credit unions are the most democratic of financial institutions for these reasons. Similar to how the U.S. fought to gain independence from the oppressive Monarchy of England, people today are interested in having more of a say at their financial institution of choice. This article should provide some insight that will help you to feel more informed about what credit unions are and how they operate so you can make informed decisions about where to bank.

Membership

To be a citizen of the United States, you must either be born within the country or pass a citizenship test. To join a credit union, you simply need to share a common thread and open a savings account–typically with a starting balance of $25. Just like the early American settlers ready to break free from the British, a credit union’s members all share a common denominator. It can be anything really, but it is always something that binds these people together. Credit union members could belong to the same company, share the same religious beliefs, care about the same cause, or simply live in the same area. Whatever their cause, credit unions are community-minded organizations because they facilitate community development and allow individuals to have a stronger voice.

Ownership

Opening a savings account at a credit union allows you to become a member of that credit union, as well as an owner of the financial institution. This is something that makes credit unions unique in comparison to other financial institutions as it is a democratic means of management. To vote in the United States, you must be a legal citizen of at least 18 years of age; to vote on a credit union’s policies, products, and service offerings, you just need to become a member.

Unlike large financial institutions that are privately owned and deliver high profits to few individuals, credit unions are directed by members who vote on a board of directors. This board or committee of members help to decide how funds should be managed by listening to other members and voting on issues. The board of directors is there to ensure that the credit union’s funds are put to use in a way that benefits its members.

Any member of a credit union can run to be on the board of directors and only members are able to vote and elect board and committee members. Credit union members take part in the decision-making processes that affect their personal finances, thus ensuring that power and authority aren’t given to a select few. Because members are involved in the management of the organization, relationships between the credit union’s employees and members are very personable and transparent.

Not-For-Profit

Many financial institutions have the goal of generating profits, meaning its members pay higher fees and rates. This is comparable to the heavy tax the British put on necessities for communities in the colonies. Taxes were put on everything from sugar to stamps, and, of course, tea! The price of the good became too high with the additional taxes so the poor became poorer. Similarly, credit and loans at these financial institutions are given with high interest rates while savings have a very low compound interest rate, making it both difficult to pay back loans and unmotivating to save. These types of financial institutions are just like any other business – providing service while also making a high profit for its shareholders.

Credit unions, on the other hand, are not-for-profit, which is exactly what it sounds like. Non-profit institutions and organizations work for a cause or community, not for profits. They’ll offer you a cup of tea, free of charge! Because credit unions are non-profitable organizations, any profit made goes right back to the members. Some of the profit earned goes towards reduced fees, higher returns on savings, and lower loan rates for members. Essentially, member savings are loaned out and returned with interest, making credit unions a cooperative system that’s goal is the financial well being of its members.

Additional profits made by credit unions are put right back into the community of its membership. Similar to taxes, these profits go into sustaining the credit union and its programs and services. Many credit unions choose a specific cause or service that can benefit members. For example, Opportunities Credit Union funds programs and workshops about home buying, budgeting, and new citizenship. These programs are useful and helpful for members. Opportunities also sponsor community programs and events such as LaunchVT and #BarnPitch2016.

Like other financial institutions, credit unions offer financial services such as savings and loans. With low interest rates, higher returns, and cooperative management, credit unions are appealing to individuals who are looking to have more of a say in the financial future of their community.

Every nation needs order and every person needs financial services. While there have been some very successful monarchies and oligarchies, democracy has always been the dream. While banking is similar no matter what financial institution is used, the fine details of fees and rates can greatly impact someone’s financial situation. The reduced fees, high savings rates, and low loan rates make credit unions a great alternative for big business financial institutions.