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Why Choose a Credit Union?

LOS ANGELES--(BUSINESS WIRE)--April 13, 2005--Many consumers may be surprised about all of the benefits of credit union membership - such as higher deposit returns, lower loan rates and a variety of other market-leading service offerings. In fact, surveys have shown that a large percentage of consumers don't even know what a credit union is - or may only have a vague idea, and an unclear understanding of the difference between a credit union and a bank.

The fundamental difference is the not-for-profit co-operative structure of credit unions. As co-operatives, credit unions are owned by their members - unlike banks, which are owned by their stockholders. And unlike banks, where the profits are returned to the share-holding stockholders, credit union "profits" (or excess earnings) are returned to the member/owners in the form of superior rates, lower fees, and high quality products and services.

"There are a lot of myths and misconceptions out there about credit unions," said Steve Punch, President/CEO of the $325 million First City Credit Union, one of Southern California's leading credit unions. "First City, and the industry as a whole, spends a lot of time and resources trying to help consumers understand the difference, which is the cooperative structure. We think when they do understand, they will have a better idea of the benefits of opening credit union accounts."

"Small" Is Not the Difference

Many consumers erroneously believe that credit unions are inherently small, "mom and pop" organizations, with services and account access systems that are limited by their size. This could not be farther from the truth: there are a number of large, multi-billion dollar credit unions with hundreds of thousands of members. And there are many small credit unions - with only a few hundred members and few million dollars in assets.

"Credit unions may be seen by some to be small, and somewhat unsophisticated. However, as cooperatives, we also cooperate among each other... and our cooperative nature has made us innovators and leaders," said Punch. "For example, credit unions were among the first to offer consumer loans at reasonable rates back in the 1930s... and, more recently, we were among the first to offer fully operating Web sites with online home banking and bill payment. So no matter what the size, most credit unions are able to offer a sophisticated, even technologically advanced, financial product offering."

Most credit unions, large and small, extend the same technology-based delivery channels as banks, including expansive ATM and point-of-sale networks, online banking and bill payment, automated phone services, and so on.

The CU Service Center Network is a good example of the technological cooperation between credit unions to provide better service to their members. This unique branch network allows members of participating credit unions to access their accounts at over 1,500 shared branches nationwide.

"Our members love the shared branch network," said Punch. "First City members can make deposits, make withdrawals, and perform other transactions at these branches, which makes us as convenient as any of the big banks."

Members of participating credit unions, including First City, also have free access to over 19,200 CO-OP Network ATMs. "We have over 780 free CO-OP ATMs right here in Los Angeles County. That's more than any of the big banks," said Punch.

Many consumers also perceive that credit unions do not offer a full range of financial services. In fact, most credit unions offer all, or most, of the services offered by banks, including:

-- Savings and money market accounts

-- Certificates

-- IRAs

-- Auto loans

-- Credit cards

-- Personal loans

-- First and second mortgages

-- Home equity lines of credit

The cooperative not-for-profit structure allows credit unions to offer these products at a better price than banks. Credit union loan rates are generally lower than those offered by banks, and deposit rates are higher. Credit union fees are generally lower - often much lower.

"Credit unions offer consumers an excellent value for their banking products," said Punch. "Any profits we derive are returned to the members in the form of superior rates and lower fees. We are accountable to our member/owners; not to our stockholders. Bank stockholders will always be looking for higher profits. Credit union member/owners will always be looking for a better product at a better price."

Because credit unions are generally thought to be smaller than banks, some consumers have voiced concern about their institutional soundness and the safety of member deposits. In fact, the National Credit Union Administration (NCUA), which provides federal insurance for most of the nation's federal and state chartered credit unions, is America's strongest financial insurance fund. And due to the stringent requirements of the NCUA, most credit unions have higher capital reserves than FDIC-insured banks. First City, for example, maintains its reserves at nearly 12 percent of its assets - placing it among the nation's strongest financial institutions.

Everyone Can Join a Credit Union

Credit unions have what are referred to as "closed memberships," which means that not every individual can belong to a particular credit union. The members of the credit union must share a "common bond" - through employment, organizational affiliation (such as a labor union, church, trade association, Chamber of Commerce, etc.), or community.

Because of the closed membership structure, some consumers believe that they cannot join a credit union. However, many credit unions - including First City - have "community charters," which means they can serve anyone who lives, works, worships, or goes to school in the communities they serve.

For example, First City serves people who live, work or worship in many communities throughout Los Angeles and parts of San Bernardino Counties. First City's membership eligibility is also extended to employees, retirees or members of the various organizations and companies it serves. Individuals can also join if they are in the immediate family of a First City member.

"Virtually every community in America is served by a credit union," said Punch. "This means that anyone can join a credit union - even if your employer does not have a credit union. While you can't join any credit union - like you can open an account at any bank - there is a credit union that you can join. It's just a matter of finding out which ones you are eligible to join."

To help consumers find a credit union they are eligible to join, the credit union industry maintains provides an online "match-up" service. The consumer types in the name of their community, employer, school, or association and the Internet links to one or more credit unions will automatically appear. The service can be found at http://www.howtojoinacu.org.

A Democratic Model

As member-owned co-operatives, credit unions operate on a democratic model. Each member has the power to influence and direct credit union policy - and, unlike banks, credit union give their members "a voice" in the organization's operations.

Credit unions hold annual meetings during which members elect a Board of Directors - from among their membership - to represent the members in determining the future direction of the credit union. The credit union not-for-profit model allows for cooperative decision-making, which empowers each and every credit union member.

An Alternative to Those Not Served by Others

Many credit unions - including First City - offer services to those who are not served by other financial institutions, including those who may have had financial problems in the past. First City products include the credit union's innovative "Credit Builder" loan, which helps members establish or re-establish credit, and its "Check Builder" account, which offers members a second chance to responsibly manage a checking account.

Credit unions commonly offer community outreach and service programs tailored to the specific needs of their local neighborhood. For example, an education-based credit union may offer scholarships and other programs particularly suited to the needs of students and young people. First City sponsors a number of events in the communities it serves, and annual fundraisers for programs to help the employees and families of one of its major sponsor groups, the Los Angeles County Sheriff's Department.

"Most credit unions really work to be part of their communities - whatever those communities may be," said Punch. "We were founded for the purpose of helping people, with a mission of providing affordable financial services, and with relationships based on caring and trust. Caring is in our structure, and we truly care about our communities and our members. After-all, our members own the place, and we never forget that!"

Contacts

First City Credit Union
Tom Thompson, (213) 482-3477, ext. 2220
or
Jamie Douglas, (310) 305-3814