History & Philosophy
People Helping People Since 1909
To understand why credit unions are different from all other types of financial institutions it helps to know something about why credit unions exist. Credit unions were formed because average hard working people needed access to fairly priced credit. Banks weren't in the business of making consumer loans. The only way a working person could get a loan would be to see a "loan shark."
Various social visionaries, Rafaissen in Germany, Desjardins in Quebec and Filene in Massachusetts worked throughout the latter half of the nineteenth century and the early twentieth century to devise a workable system of cooperative consumer credit. The modern credit union movement grew out of their idea that people could work together to create solutions to meet their financial needs.
Credit unions were first formed in the United States here in New England in the early 1900s. In fact, the first Credit Union in the nation, St. Mary's Bank Credit Union, was located in Manchester, NH.
Credit unions were formed on three basic principles: member ownership, democratic operation, and not-for-profit cooperative character.
The credit union is owned by its members. The members determine the scope and character of the credit union. The measure of success is whether or not the member/owners of the credit union are getting good financial services. Other institutions are owned by investors and stockholders. They are interested in getting a return on their investment and if that means leaving a certain market, selling off a product line or the entire bank, that is what will be done.
The credit union is operated democratically, with each member having an equal say in the credit union's future regardless of the size of his or her accounts. Each member has the opportunity to vote in annual elections for volunteers who serve as the directors of the credit union.
The credit union, as a not-for-profit cooperative, returns all of the income it generates back to its members in the form of lower rates on loans, higher rates on savings, or better account fees. The lack of profit motive does not make the credit union financially unstable, however. Financial stability is essential to the mission of the credit union. Credit unions are carefully regulated, well-capitalized and extremely stable financial institutions.