Christine Blake, CEO, Cardinal Credit Union.
As the CEO and president of a credit union, it’s no surprise that I believe credit unions are the backbone of America. With a foundation rooted in community service and a focus on people helping people, credit unions provide a valuable service to their communities, often eclipsing larger and nationally known financial institutions with their personalized approach and ease of doing business.
Benefits Of Credit Unions
One of the hallmarks of credit unions is their ability to offer more attractive loan rates and lower fees than larger financial institutions. Being a nonprofit enables credit unions to take advantage of their structure as a member-owned financial cooperative, including the ability to lower operational costs and redirect profits back into the credit union for the community.
Today, the credit union model is mostly based on inclusiveness and is open to members of the community who can benefit from customized financial services. Many credit unions serve large parts of their communities. In return, they typically have a one-time membership fee and require members to open a savings account with a minimum balance.
Credit unions were created to help working-class individuals who lacked access to traditional banking services. The idea was to pool resources and provide financial services to members who share a common interest or affiliation, such as employees of a particular company, institution or trade.
The primary goal of a credit union is to serve individual and small and medium-sized business (SMB) members through:
Lower Fees And Better Rates: As mentioned, credit unions can usually offer lower fees and better interest rates on loans and savings accounts. For example, a credit union might offer a savings account with an interest rate of 1.5%, while a traditional bank might offer only 0.5%.
Member Ownership: Credit union members typically can influence decisions, better ensuring that the credit union operates in the best interests of its members and the communities they serve.
Community Focus: Credit unions focus on helping their communities. Most offer financial education, support through grants and loans, and assistance to members who have lower credit scores.
Profit Redistribution: Credit unions use their profits to benefit their members, either by reinvesting in the organization or by giving dividends to members, unlike larger financial institutions that give profits back to shareholders.
Personalized Service: Credit unions focus on building relationships with their members and offering personalized service. This can be helpful when members are applying for loans or refinancing a home.
Caveats Of Credit Unions
Credit unions are known for their personalized service, community focus and member-first approach. While they offer many advantages, it’s important to consider your specific banking needs. Some credit unions prioritize core financial services, which may mean fewer branches, ATMs or specialty offerings compared to large national banks. For example, services like international banking, foreign currency exchange or extensive wealth management may be limited. However, many credit unions are continually expanding their offerings and provide access to nationwide ATM networks and digital banking solutions. When choosing a financial institution, it’s helpful to match these features with what matters most to you—whether that’s personalized service, competitive rates or specialized products.
Technology: Enabling The Credit Union Model
Like their larger financial competitors, credit unions are adopting advanced technologies to deliver enhanced services and new capabilities, such as digital wallet services and contactless payment options. For example, my credit union, based in northeastern Ohio, offers mobile and online banking, enabling members to manage accounts, transfer funds, pay bills and deposit checks from anywhere. It also operates branch locations throughout the area for those individuals and businesses who prefer in-person banking.
Since many services are now cloud-based, members can manage access to data and take advantage of robust security measures, such as multifactor authentication and encryption, that protect financial information and help prevent fraud.
With artificial intelligence (AI) pervading all aspects of life, credit unions are right in the mix. They are applying these technologies to their daily operations and are using AI to analyze large quantities of data to offer personalized financial advice, tailored product recommendations and proactive support for a more customized and efficient member experience.
Individuals and businesses have many options to choose from when considering who is best to manage their money. While larger institutions can offer services at scale, the local community credit unions can tailor specific products and programs to meet the individualized needs of their constituents—all without profit being the main driver.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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