Download our app in the AppStore now!

Download our app in the Play Store now!

View the Mobile Web Version of our app here!

You're seeing this message because you're using an older version of Internet Explorer that is unsupported on our website. Please use these links to upgrade to a modern web browser that fully supports our website and protects your computer from security risks.

Hide this message

FSU Tag Line
 

 

Bookmark and Share

How Are Credit Unions Different From Banks?
06/20/2014

How Are Credit Unions Different From Banks?

A Conversation with Rod Staatz, President and CEO of SECU

Credit unions sometimes have an image as stodgy, low-tech places that offer financial services like Christmas savings accounts and vacation loans. That image, however, is out-of-date, according to Rod Staatz, President and CEO of SECU, Maryland’s largest state-chartered financial cooperative with more than 22 branches across Maryland, 230,000 members and $2.8 billion in assets. Staatz recently discussed the myths and realities of credit unions.

Q. Many people assume that credit unions and banks are essentially the same thing. Are they basically different names for the same kind of financial institution, offering the same kinds of services, or is there a real difference?

Staatz: Credit unions are, by definition, not-for-profit, cooperative financial institutions. They are owned and controlled by the members who do business with them, unlike banks, which are accountable to their shareholders, who may or may not bank there. That distinction allows credit unions to return earnings to their members through higher interest rates on savings, low or no fees, lower loan rates than banks are able to offer, innovative technology, and free or low-cost services for which banks now charge.

Q. What do you mean when you say credit unions are owned by their members?

Staatz: Every person who banks at a credit union is a member and an owner, not a customer. As such, the interests and needs of those members are always first and foremost in any decision-making. They also benefit directly from the earnings of the credit union. In contrast, banks are generally owned by shareholders, and any profits are passed on to those same shareholders.

Q. You said credit unions are not-for-profits. Does that mean they don’t pay taxes?

Staatz: No. Credit unions are exempt from federal income taxes because of their singular focus on providing benefits that directly help their members. Credit unions do pay a number of other taxes, though, including social security and Medicare taxes, and a variety of state and local taxes.

The federal tax exemption for credit unions dates back to 1938. With the country still dealing from the effects of the Depression, Congress granted a tax exemption to credit unions in recognition of the fact that – unlike banks and other financial services companies – credit unions are not-for-profit organizations with a specific mission to meet the credit and savings needs of consumers, particularly persons of modest means. That thinking led Congress to exempt credit unions from federal taxes then and to reaffirm that policy repeatedly ever since.

The recent financial crisis offers a great example that credit unions’ tax exemption continues to serve the purpose for which it was created. Despite the impact of the recession and new government regulations that made it more difficult for small businesses to obtain loans, credit unions actually experienced a 45 percent increase in business lending over the past six years.

Q. Isn’t credit union membership limited to people who work for a certain company or live in a specific geographic area?

Staatz: While credit unions typically have defined fields for membership or a common bond for eligibility, there is greater access to the benefits of credit union membership than ever before. Today, there are thousands of credit unions across the U.S. whose membership is based on workplace, place of worship, university affiliation and various other membership segmentations. Bottom line, there is a credit union for everyone. 

Q. What about services? Do credit unions offer the same kinds of products and services as banks?

Staatz: Credit unions typically offer the same range of products and services as banks, and in much the same way as commercial banks do – online, using mobile apps, by phone and in branches. Like banks, credit unions offer credit cards, debit cards, online and mobile banking options, automated bill pay, mortgages, auto loans, lines of credit and more.

Credit unions have an advantage in offering more flexibility in lending opportunities for their members. They can review loan applications with their personal and community-specific insight, rather than having to follow strict national guidelines. As a result, credit union members not only have access to a wide variety of products, but also are likely to receive lower rates on credit cards and loans, lower minimum balances and services fees, and higher interest rates on deposits than banks.

Q. You mentioned branches. Don’t credit unions have a major drawback in that they are not conveniently located?

Staatz: Most credit unions are part of the national Co-Op Network, which means members have free access to more than 30,000 credit union and other ATMs nationwide. Beyond their physical locations, credit unions are as tech savvy as banks. Most credit unions now offer electronic services like online banking, mobile banking, text banking, remote deposit, online statements and notices, and imaging ATMs, allowing members access anytime from anywhere. SECU, for example, offers full online and mobile banking capabilities, 22 physical branches across the state and a free ATM network of over 72,000 ATMs nationwide.

Q. You mentioned tech savvy. What does that mean to the consumer?

Staatz: Absolutely. Because we live in a 24/7 environment, consumers no longer want to be constrained by “bankers’ hours.” They expect their financial institutions to meet their needs by conforming to their schedules, rather than the other way around.

To meet consumer demands to make transactions quickly, get accurate and timely answers to their questions, and conduct business at times that are convenient to them, credit unions increasingly are taking advantage of the advances technology affords. In addition to online banking, mobile banking and so forth, credit unions are engaging their members through the use of Facebook, Twitter and other social media sites that provide a forum to ask questions and enhance financial literacy. Members can stay current on important account news, as well as new or pending legislation, events and promotions.

While technology can enhance the services credit unions offer, though, it will never replace the true one-on-one customer service people have come to expect from credit unions. By combining technology and online options with face-to-face access to information and service, credit unions are doing what it takes to make members financially successful and improve the financial well-being of the communities they serve.

Learn more about SECU at secumd.org.

 

For further information on this release, contact:

Office of News and Media Services
Frostburg State University
101 Braddock Road
Frostburg, MD  21532-2303

Telephone: 301-687-3171
Fax: 301-687-7589
E-mail: news@frostburg.edu