3 Strategies Credit Unions Are Investing In to Compete With Banks

Franklin D Roosevelt started the credit union system in 1934 when he signed the Federal Credit Union Act.

According to the law, the purpose of credit unions was “to make more available to people of small means credit for provident purposes through a national system of cooperative credit.¹” In other words, people could borrow the money held in checking and savings accounts at the credit union to help them buy a home or start a business.

Credit unions refer to their customers as members because of their unique charter and not-for-profit status.

As of 2019, credit unions across the U.S. have 120.4 million members². These members are part owners of the institution. They can run for the board and even receive dividends.

Additionally, members find they receive more personal attention and better services – like financial education resources.

For example, OnPoint Community Credit Union, Honda Federal Credit Union, California Coast Credit Union, and BCU have all partnered with iGrad to go the extra mile and offer the award-winning Enrich™ financial wellness platform to their members.

Here are three things that credit unions have been investing in to make themselves more attractive to their members. 

#1: Credit Unions Make it Easy and Affordable

Credit unions work hard to have amazing member service. Instead of getting stuck in endless digital phone loops, members can speak to a live credit union representative whenever they call the credit union. This means that when members have a question, concern, or want to get information about another offered service, they don’t have to wait on hold for hours in hopes of talking to the right individual.

In addition to great member service, credit unions make it easy to do day-to-day banking.

Credit unions have embraced technology that allows members to bank from anywhere. As a credit union member, you can:

• Pay bills online
• Deposit checks from a smartphone app
• Check account balances
• Make ecommerce payments through services like Square, Zelle, and Paypal

To sweeten the pot, credit unions do all this at a lower cost than banks. As a non-profit, credit unions have lower fees for the services they offer – sometimes, they have no fees at all.

Finally, credit unions offer very competitive rates on CDs and savings accounts.

Lending Tree researched to determine who offered better rates: credit unions or banks. Based on information from their database, credit unions proved to have better rates on CDs, savings accounts, checking accounts, and money market accounts at almost all levels³.

All of this adds up to easy, affordable banking for credit union members.

#2: Credit Unions Have More Consumer-Friendly Lending Practices

Banks are for-profit entities that must answer to corporate owners and stakeholders. Because of this, lending practices tend to be very strict and formal.

They typically don’t allow exceptions or explanations of personal circumstances. If someone doesn’t meet all the criteria exactly, they are either given a loan with a much higher interest rate or denied a loan altogether.

Credit unions are willing to listen to their members. While they also have loan guidelines, they’re more forgiving.

For instance, someone with a new job may not have tax returns that show their new earning power. A credit union can adjust its guidelines to reflect this information.

In other words, because they are community institutions, they work to help people get the loans they need. They can make exceptions and be flexible. 

#3: Credit Unions Provide Financial Wellness Education

One of the goals of credit unions is to help members, and the communities in which they live, be better. To help achieve this goal, credit unions help members understand financial topics and learn how to become financially well.

Credit unions understand that their members have financial questions and concerns. Statistics show that:

• 77 percent of Americans feel financial stress4
• Two out of three American households lack an emergency savings of six weeks or more5
• Over three-quarters of adults live paycheck to paycheck6
• Half of millennials are worried about student loan repayment7
• Three out of five Americans had credit card debt within the last year8
• About 80 percent of Americans experience barriers to homeownership at some point in their life?

Because credit unions exist to help their members, they understand the need to provide financial education and guidance on topics like budgeting, buying a home, or using credit wisely – things not as likely to be provided by large, institutional banks.

With these benefits, it’s no wonder that people are choosing to work with credit unions and that their membership continues to grow.

1 - https://uscode.house.gov/view.xhtml?path=/prelim@title12/chapter14&edition=prelim 

2 - https://www.americanbanker.com/creditunions/list/6-takeaways-from-ncuas-q4-2019-data# 

3 - https://www.depositaccounts.com/blog/banks-credit-unions-best-rates.html 

4 - https://www.nfcc.org/resources/client-impact-and-research/2019-consumer-financial-literacy-survey/ 

5 - https://www.nytimes.com/2019/10/25/your-money/emergency-savings.html 

6 - https://www.forbes.com/sites/zackfriedman/2019/01/11/live-paycheck-to-paycheck-government-shutdown/#5397b14a4f10 

7 - https://www.pwc.com/us/en/about-us/corporate-responsibility/assets/pwc-millennials-and-financial-literacy.pdf

8 - https://www.nfcc.org/resources/client-impact-and-research/2019-consumer-financial-literacy-survey/