Credit unions are one of cooperating organizations in the USA cooperating finance subordinate and capable to contend with conventional banking organizations. Savings, loans, and credit cards as well as other financial services are available in these member-owned financial cooperatives and the interest rates as well as fees charged are usually lower compared to commercial banks.

Unlike most banks, which work for the purpose of making profits, credit union organizations are not-for-profit organizations. This primary difference defines their services and products, which makes them rather attractive for many ordinary American buyers seeking for more individual approach to their financial status.

History and evolution of credit unions in the US

Credit unions have their origins in the United States of the early twentieth century, stimulated by the lack of accessible and reasonable credit for ordinary people. It started with the need to address financial abuse that the average laboring employees suffered in that people could combine their resources in order to benefit from them collectively.

Federal Credit Union Act was framed in the year 1934 to offer federal charter for these mutual and the micro environment for improving was more controlled here. These acts were very instrumental in the formation of the modern credit union industry and enabled them to help the population as a whole.

These cooperative institutions have however developed over the decades, in relation to the current technological changes and consumers’ needs. Today, they offer numerous services that are directly comparable to the services of conventional banks.

The regulatory framework

There are certain rules and regulation which are specifically meant for the credit unions in the United States to ensure the secure operations. Provided by the Federal Credit Union Act, such rules aim at safeguarding members’ interests as well as at ensuring the stability of credit union effectively.

The federal credit unions are mostly regulated by the National Credit Union Administration abbreviated as NCUA. Like FDIC for the banks, the NCUA maintains legal requirements and offers insurance for the deposits.

This negative environment of regulation sustains the stability and solvency of credit unions, demonstrating to members that their money is protected under a favorable policy regime coated in robust process.

Differences from traditional banks

There are certain differences between credit unions and other banks also refer to them as ‘’different facets of the same thing’’. They are all members-owned and thus they will look at the needs of the customers and the benefits of the community than the bottom line.

This differentiation results in reduced charges, appropriate interest rates on loans and high returns on saving’s on the side of the members. In addition, these cooperatives focus a good deal on providing service to their center, and provide services and financial advice to the communities they serve.

The latter can distinguish them from other large, less-communal banking institutions out there. The board of directors of credit unions is also elected from among the members, which eliminates the possibility of an institution’s focus on external shareholders’ instead of members’.

The impact of credit unions on local economies

By being active players in the proper management of money in the economy and having a strong focus on the community involvement, credit unions have a significant influence on the economy of a specific area. They help to facilitate economic and social justice since they carry out their activities in the areas where the population has limited access to quality financial services.

In many instances, such cooperatives give out credit to businesses and individuals that other commercial banks would not be willing to extend credit to, hence promoting employment and economic development at the local level. Members can be favored over profits and such an orientation is likely to result in more community-based services and money management outreach.

Financial education initiatives

Another area that has been covered well by credit unions is the provision of and or emphasis on financial literacy. All of these cooperatives conduct training sessions in form of workshops, seminars or online platforms to enhance members and the public’s financial literacy.

These include such topics as elementary aspects of the management of money such as saving and spending, credit, and retirement among others. With the kind of education that credit unions assist in providing an individual in financial decision making, this is economic strength in the community.

The emphasis laid on education is in tune with this fiduciary mission as they are service providers who are not only entrusted with peoples’ monies but are in fact required to teach people about finance and thus redefine the roles and responsibilities of financial institutions.