Since they originated in 19th century England and Germany, credit unions have always been nonprofit, cooperative financial institutions. Instead of focusing on increasing shareholders' earnings, their mission is to help all members attain optimal financial health to enjoy better lives.
In the past, joining a credit union usually required being a member of an industry-specific group, such as lawyers, educators or the military. But that's no longer the case. Although federal law prevents credit unions from serving the general public, membership criteria is more flexible today. Some only require its members be affiliated with an employer, church, school or community. Almost anyone can find a credit union they are eligible to join and reap the rewards of membership.
According to the National Credit Union Association (NCUA), approximately 9,300 federally insured credit unions serve 83 million members with deposits exceeding $528 billion. In San Diego, there are nearly 1 million credit union members.
Whether they belong to smaller, niche-specific organizations or larger credit unions with a broader membership base, members benefit from financial products that match or exceed those offered by banks. But they also get something of equal, if not greater value, that banks don't often deliver -- exceptional, personalized customer service.
"We approach business with our members' best interests in mind whereas banks focus their interests on a third-party shareholder who may or may not be a customer of the bank," said Linda Baughman, president and CEO of USE Credit Union (Spotlight: USE). "We're here to serve people who own the credit union. It's not just about providing them with great prices, products and services -- it's the quality of the relationships we have with our members."
Ed Daley, CEO of San Diego Firefighters Federal Credit Union, agrees.
"When they were first created, credit unions served consumers and banks served businesses," Daley explained. "Now they both serve everyone, but credit unions serve them better, because credit union members are also owners."
As owners of the place where they borrow and save, members have a say in how their credit union is run. Members have the right to vote on policies and elect members of their credit union board. Most board members serve on a voluntary basis.
"At a bank, shareholders vote for the number of shares you own versus a credit union where every member, whether they have an account with $1 million or an account with $100, gets to vote for the board of directors," said Baughman.
Today's technologically savvy consumers expect round-the-clock access to their money and financial information. Credit unions not only measure up to banks when it comes to meeting these demands, they often respond to them first.
"Credit unions tend to be more on the cutting edge than banks, because they're not driven by quarterly earnings," explained Daley. "They're more willing to focus on long-term benefits for members and take a more aggressive approach to providing innovative technology."
According to Baughman, credit unions had debit cards before banks knew what they were and also offered ATMs before many banks. And USE Credit Union was one of the first financial institutions in the world to offer Internet banking, she added. Credit unions also banded together to form the CO-OP Network, which provides members with free access to 19,000 ATMs across the nation.
Because credit unions don't compete with one another and share the same values, they often work together to achieve common goals. Recognizing that they could accomplish more as a group than as individuals, local credit unions formed the Credit Union Alliance (CUA) of San Diego in 1999. Today, the CUA has 22 members. Together, they focus on a variety of issues, including addressing challenges their industry faces, increasing public awareness of the value of credit unions and how they differ from banks through shared marketing and advertising campaigns, and lending financial and human support to community causes.
"Being a member of the alliance allows us to work with other area credit unions to address state and national issues, like the ongoing legislative efforts by banks, at the local level," said Kelli Cole, assistant vice president of North Island Credit Union (Spotlight: North Island). "It also allows us to help the public understand the credit union difference and advantages credit unions offer."
Mission Federal Credit Union, another CUA member, also touts the benefits of the alliance's cooperative approach to spreading the word about credit unions.
"Unlike big banks, we don't have a lot of money to advertise," stated Alex Armstrong, vice president of marketing at Mission Federal Credit Union. "The alliance lets us get our message out in a cost-effective way through cooperative marketing efforts. For us specifically, it also helps us let people know we're locally owned."
As credit unions continue to grow, they face challenges that make educating the public -- and reminding existing members -- of their value and the role they play in the financial world even more important. Banks, for example, continue to take steps -- such as lobbying to remove credit unions' federal tax-exempt status -- that could potentially eliminate credit unions from the financial services industry. Such a scenario, say credit union executives like Baughman, would not only hurt credit union members but would have negative consequences for all financial services consumers.
"Because our products and services are so competitive, we're like a bellwether for other financial institutions," she explained. "It puts a little pressure on them to keep prices down. If we were out of the picture, all pricing would be profit-driven, not consumer-focused. Credit unions can no longer afford to be the financial world's best-kept secret -- we need to publicly highlight that we are here to make a difference."
