Credit unions have been around since the 1800s, but not everyone understands exactly what they are, how they work, and the advantages of opening an account. If you’re a Millennial or Generation Z, you might think of a credit union as the bank your parents or grandparents use.
This was true for a while because credit unions traditionally focused on serving account holders rather than marketing. But today’s credit unions are getting the word out and adding online functionality to their services that match and surpass national and local banks – while keeping all the same benefits that made them such an attractive option to older generations.
The First Credit Union
The first credit union was established in 1864 by Friedrich Raiffeisen in rural southern Germany. Raiffeisen believed his neighbors and friends could enjoy an enhanced standard of living if only they had access to common funds. He proposed that all community members pool their resources so individuals in need of loans could easily access the necessary funds.
The Credit Union Movement Spreads
In 1909, the credit union movement crossed the ocean to America. With Edward Filene serving as its pioneer, the movement gained momentum and continued its growth. In 1920, Filene hired attorney Roy F. Bergengren to assist him in generating the movement’s expansion. Bergengren soon created a more systematized concept for the credit union model we know today.
The Federal Credit Union Act becomes Law
Credit unions were gaining popularity and popping up all over America, but it wasn’t until the 1930s that the credit union movement achieved federal recognition and national acceptance.
When President Franklin D. Roosevelt signed the Federal Credit Union Act into law in 1934, federally chartered credit unions in every state became legally authorized to create a system of not-for-profit cooperatives to promote thrift and sound financial practices. Omaha Federal Credit Union was one of the country’s early charter members, opening its doors to business in downtown Omaha, Nebraska, on April 1, 1935.
The National Credit Union Share Insurance Fund (NCUSIF) is Established
The Federal Credit Union Act enhanced the public’s confidence in the credit union movement, and it continued to spread its popularity across the country. In 1970, that sense of security grew stronger when the National Credit Union Share Insurance Fund (NCUSIF) was established. Credit union deposits gained federal insurance that functions much in the way the FDIC insures bank deposits. Between 1970 and 1979, credit union assets in America tripled.
Credit Unions Today
In 1977, another credit union-friendly regulation was signed into law, empowering credit unions to offer more services and products to their account holders, most notably mortgage lending and share certificates, which function much like Certificate of Deposits (CDs.
Today, the credit union movement continues to grow. Credit unions serve more than 100 million account holders by always putting their needs first and helping them achieve their personal goals and financial wellness through sound financial practices and advice.