Can my business benefit by establishing a credit union or by joining an existing one? The best way to answer that question is to first understand what credit unions do.
● Differences between a credit union and traditional banks
● Services offered
● Membership requirements
● The security of your money
What is the difference between a credit union and a bank?
Credit unions are not-for-profit, member-owned cooperatives that exist solely to serve their members. With no stockholders and a voluntary member-elected board, this allows the credit union to return profits to the membership. Profits are returned in the form of fewer and lower fees, higher dividends, low rates for loans, and other member services.
What do credit unions offer?
Full-service credit unions offer the same services that you would find at other financial institutions. Additionally, members enjoy cost savings on their banking services.
● Credit unions eliminate the need for a costly check-cashing service.
● An initial deposit (typically $5-$25) gives the employee an ownership share.
● There are fewer and often reduced fees for products & services compared to traditional banks. This is due to their not-for-profit, cooperative structure.
● They usually have zero or lower minimum balances than might be required by traditional banks.
● Typically, loan requirements are less stringent and interest rates are lower than at traditional banks.
So, with all these advantages, what’s the catch? There is none. As a membership organization, depositors at a credit union have access to many of the same services found at traditional banks. These include Bill Pay, Direct Deposit, Mobile Deposit, Automatic Teller Service, Shared Branching Services, and Surcharge-Free ATM access.
Who can join?
Traditionally, there are two ways that people are eligible to join a credit union.
The first method, and more traditional way, is with a common bond Field of Membership. Such a credit union partners with employers or organizations to provide benefits to the employees or members of an association. These are not open to the public, but to the employees, members, or family members of those segments that they serve.
This doesn’t mean that ONLY those who work for certain companies will ever be eligible for membership. If you, as a company, would like to partner with an existing credit union, call them and ask if they are adding new groups to their Field of Membership. This might be the best choice if you are looking for more personalized, hands-on service where the credit union will work with you to ensure that your employees are well taken care of.
The second method that is growing in popularity is a Community-Based Credit Union. These credit unions operate on the principle that if you live, work, worship, or attend school in a certain geographical area (usually by county or town) then you are eligible for membership. While some of these credit unions do still partner with certain employers or groups, they are open to a wider member base as most people in the community are eligible for membership simply because they are located in the area covered.
Is my money as safe as it is at the bank?
The answer is a resounding Yes! The National Credit Union Share Insurance Fund (NCUSIF) is a federal insurance fund backed by the full faith and credit of the United States government. The NCUSIF insures member savings in federally insured credit unions, which account for about 98 percent of all credit unions in the United States. Deposits at federal credit unions and the vast majority of state-chartered credit unions are covered by NCUSIF protection.
How can this benefit my business?
Partnering with a credit union is a no-cost way for employers to provide low cost banking services to employees. Lower minimum requirements, lower fees, less stringent loan requirements and possibly lower interest rates mean that employees get to keep more of their money.
Forming or joining an existing credit union can be beneficial for both employers and employees. There is no cost to the employer to provide a significant employee benefit that eliminates high check-cashing fees, provides cost saving services and saves money for employees. Employees who feel good about their finances are happier, less stressed and more productive in all areas of their lives.
By Heather Blanton
Heather Blanton is the Development Coordinator for Arkansas Best Federal Credit Union located at 3501 Old Greenwood Road in Fort Smith. Heather lives in Greenwood with her husband Matt, 2 dogs, 2 cats, and 6 chickens. She has been in the credit union industry for 8 years.