The Case for Credit Unions
The Case for Credit Unions
By Vickie M. Fouts
Where do you want to keep your hard earned money, within the community or in the pocket of major bank CEOs and their stock holders? Do you use a local credit union or a national bank for your financial needs? It can make a big difference in whether you are helping a neighbor make a modest, middle-class income or just helping corporate CEOs get richer.
Credit unions are not-for-profit financial cooperatives. This means that one member’s savings becomes another member’s loan. A credit union is owned entirely by its members, so there are no investors to dictate decisions based on stock prices and dividends. Instead, management answers to a volunteer board of directors elected from the membership who are dedicated to making decisions that provide the most value to all members.
Without shareholders to pay, profits are returned to members in the form of lower loan rates, low or no-fee products and services, and higher savings rates. The not-for-profit status of credit unions enables them to operate at a lower cost than many for-profit institutions.
You can become a member of many credit unions by just living or working in a certain town. Your immediate family can also join, or you may be able to join a credit union of an immediate family member. Some credit unions are open to employees of companies with 100 or more people. Many city, county and state employees have established credit unions.
The Salary Scale
The CEOs of America's 500 biggest companies earned (www.forbes.com/2009/04/22/executive-pay-ceo-leadership-compensation-best-boss-09-ceo_land.html) $5.7 billion in 2008, which averages out to $11.4 million apiece. Here is Forbes’ ranking of some financial institution CEO salaries as of April 22, 2009.
- Richard D. Fairbank, Capital One Financial, at $19.31 million
- Kenneth Chenault, American Express Co., at $15.89 million
- Kenneth D Lewis, Bank of America, at $12.52 million
- John G Stumpf, Wells Fargo, at $1.38 million
Compare that with the total compensation and benefits of less than $2 million paid by one credit union with almost 30 employees. You can surely see that their CEO didn’t make several million dollars a year.
The Non Profit Times reported in July 2009 that the average pay for a CEO of a non-profit was around $100,000 with the average total compensation for a nonprofit sector employee being $45,615. Another point is that employees of credit unions spend their salaries locally, not in New York, San Francisco or some other big city. Their calls are handled locally too, not farmed out to an overseas call center.
Rates & Services*
Services offered by credit unions are the same as the big guys, but the interest rates can be much different. Credit unions offer checking, savings, CDs, IRAs, mortgage, major credit cards, auto and personal loans. Before the recent financial meltdown the difference in interest rates were much larger than they are today, but you’ll still find that credit unions provide better rates banks.
Major Banks - 5.125-5.413%
Local Credit unions - 5.99-6.99%
Major Banks - 4.70-7.59%
Local Credit unions - 3.9-4.5%
Major Banks - 8.65-12.99%
Local Credit Unions - 6.9-8.9%
Major Banks .05-.10%
Local Credit Unions - .10-.50%
* Rates are based on research conducted by the author at three California credit unions and several large banks, such as Bank of America and Wells Fargo.
The National Credit Union Administration, a Federal government agency, insures all accounts to $250,000. That’s the same amount as banks, which are insured by Federal Deposit Insurance Corporation. Most credit unions were founded in the 1930 - 1950s.
Too often I see progressives and even socialists using large corporate banks, while at the same time complaining about “Corporate America’s” greed and hold over the American people. I encourage these people to walk their talk, close their traditional bank accounts and open up a credit union account instead. Maybe it won’t hurt the CEOs and stock holders that much, but it sure would be keeping your money in the community, helping a neighbor, and taking part in actual progressive behavior.
Vickie Fouts is a member of Fresno WILPF.