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Exploring the Rich History of Credit Unions

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Major financial institutions aren't the only option for handling your banking needs. For more than 150 years, credit unions have been a more accessible alternative to traditional banking. They've also played an important role in making funds available to small businesses and supporting local communities.

Let's take a closer look at the impact and history of credit unions.

A Brief History of Credit Unions

Credit unions date back to the 1850s. Politician Franz Hermann Schulze-Delitzsch, a strong supporter of cooperative economics, created the first credit union in Germany. The purpose was to apply cooperative finance principles and make lending more accessible through the use of pooled funds.

This financial model appeared in North America in 1901 when Canadian journalist Alphonse Desjardins founded the People's Bank of Levis in Quebec. The first U.S. credit union dates back to 1909 with the St. Mary’s Cooperative Credit Association in Manchester, New Hampshire.

Credit unions continued growing throughout the 1920s due to the strong demand for affordable banking. Efforts to regulate credit unions at the federal level during the 1930s inspired trust and supported further growth. More recently, laws introduced in the 1980s increased backup liquidity and helped credit unions become modern financial institutions.

The Purpose and Philosophy of Credit Unions

Upon finding their footing in the U.S., credit unions quickly became an appealing alternative to the traditional banking model thanks to their local focus and member-owned structure.

While banks generate profits for their owners or shareholders, credit unions operate on a not-for-profit model and pool funds to issue loans. This approach keeps costs down, and any profits go to members in the form of lower fees and more affordable rates. There is also a strong emphasis on customer service and keeping funds local.

Regulatory Framework

Credit unions help communities thrive. Affordable lending options are good for small businesses, and families can also bank with an institution that has their best interests at heart.

Credit unions have been able to achieve their goals thanks to a regulatory framework that has supported their expansion:
  • The Federal Credit Union Act of 1934 and Revenue Act of 1951 established the tax-exempt status of credit unions. This status allows credit unions to save on operating expenses and redistribute any profit.
  • The creation of the National Credit Union Administration in 1970 made credit unions accountable to a federal agency. The NCUA also guarantees deposits, fostering trust in credit unions.
  • The Credit Union Membership Access Act of 1998 allowed credit unions to expand their field of membership. This decision made affordable banking products available to more consumers.
The Impact of Credit Unions

With nearly 5,000 credit unions in the U.S., these organizations are an essential component of the country's financial infrastructure. In fact, more than 136 million members take advantage of the wide range of affordable banking products offered by credit unions.

At the end of 2022, credit unions' shares and deposits added up to an impressive $1.85 trillion. Credit unions had a total commercial loan volume of $25 billion in 2023. This number illustrates the vital role they play in supporting small businesses.

Experts estimate that credit unions create $975 million in value each year in the state of Florida alone. With a mortgage approval rate of more than 40% for low and moderate-income borrowers, credit unions are making homeownership more accessible in Florida.

Join Your Local South Florida Credit Union

Credit unions have always been an integral part of South Florida communities. These organizations support a robust local economy by making lending and other banking products accessible to entrepreneurs and consumers.

You can benefit from the member-centric approach by opening an account with your local credit union. If you're a South Florida resident, you can meet Power Financial Credit Union's membership requirements and access a full range of banking products and services.

Yes, you can join Power Financial Credit Union. Contact us today or visit one of our South Florida branches to learn more!