It’s payday and time to decide what to do with your paycheck. Do you take it to one of several banks likely to be located in your town, or do you look for a local credit union instead?
Credit unions are becoming more popular around the country as members identify with a more personal touch from the people with whom they entrust their money.
“Since we have such a good relationship with our members, they trust us,” says Laida Garcia, executive vice president for Florida Central Credit Union. “We are the experts and they come to us for advice and they trust what we say.”
Smart Business spoke with Garcia about how people can decide whether a credit union is right for their financial needs.
What are the distinctive differences between banks and credit unions?
That is a good question because, obviously, we offer similar products such as deposit accounts and loan products. What really makes us different is our structure. Credit unions are not-for-profit financial institutions. We exist solely to service our members, not to make a profit. We don’t issue stocks and we don’t have stockholders to whom we have to pay a dividend. That’s the biggest difference.
Another difference is that our board is made up of volunteers and our membership is made up of the members and owners of the credit union. They vote for the board of directors and have a very clear voice in how the credit union is operated and what kind of service we provide for the members. It is a democratically owned cooperative.
And in some banks, obviously, when you are a very large customer, you have more influence than the smaller depositor. With credit unions, all members are created equal; whether you have $5 or $5,000, you have one voice and one vote.
What makes good credit unions stand out from the rest?
A good credit union has a philosophical mission to complete or to perform. We are there for our members; we are not profit-driven but rather service-driven, and provide the services our members really need. For example, I don’t know of any bank that offers $300 personal loans but we do, because a lot of times we’ll have a member that has a medical emergency or needs a new set of tires. Even though we lose money when we make small loans, we feel that it is our mission to provide our members that service.
What does stockholder versus member mean, and what is the benefit?
The benefit is that we don’t issue stocks, so we don’t have stockholders to whom we have to pay dividends and profits. What that means to our members is that all earnings are returned to them in the form of lower rates on loans, higher rates on deposits, lower fees and better service, which is a distinct advantage.
Banks have always tried to emulate our personal touch. When we were smaller in size, we always knew our members by name. That has changed as some credit unions have grown in asset size and in number of members. But — except for issues dealing with safety and soundness — we will always put member service above every other aspect of the credit union. Our members are not merely numbers in a bottom line.
How long have credit unions been around?
Credit unions were formed after Congress passed the Credit Union Act in 1934, and were in Europe long before that. They have always been more service oriented than banks. Through the years, credit unions have gotten bigger with a broader field of membership and the services have been expanded, but the philosophical mission and structure has never changed since day one.
Credit unions have traditionally used direct mail and newsletters to spread the word, but it is important to get the message to the consumer. Credit unions are not just for the select employer groups any more. In the old days, a credit union could only service the employees and families of a specific company. If you were the owner of a small- or mid-sized company and wanted to offer access to a credit union as a fringe benefit, you had to establish your own. Credit union membership eligibility is generally through a common affiliation in employment, church and so on. But many credit unions now are open to the community. We are community-based; anyone that lives or works in our community can join.
LAIDA GARCIA is the executive vice president for Florida Central Credit Union. The company has 10 branches across central Florida and approximately 42,000 members. Reach her at (813) 879-3333 or [email protected].
