When I tell someone that I work for a Credit Union, often I think that they hear "Bank." Outside of the Financial Services Industry, I can understand how many people could misunderstand them to be one in the same. We both have ATM's, Checks, we're both insured and regulated by the Federal government, and we both get mad when you forget to mail in your loan payment. So I thought I would spend this week discussing what makes a Credit Union a Credit Union...and how our differences might benefit you and your financial goals.

Credit Unions were formed around the beginning of the twentieth century so that ordinary folks could borrow money. At that time, Banks were like Private Clubs only reserved for the very wealthy. If you were a regular Joe, it was nearly impossible to obtain a loan through what we would consider normal avenues today. The structure of a Credit Union has remained relatively unchanged and essentially is a cooperative of individuals who pool their resources to financially assist one another, "the membership". Thus, equal regard to the contributions of each member is given. The mission is mutual assistance, not profit.

As stated by the Credit Union National Organization (CUNA), "Since its origin, the idea's guiding principles have remained the same: (1) Only people who are credit union members should borrow there; (2) loans are made for "prudent and productive" purposes; (3) a person's desire to repay (character) is considered more important than the ability (income) to repay. Members are, after all, borrowing their own money and that of their friends. These principles still govern most of the world's credit unions."

Because of their general principles, practices, and guidelines, credit unions tend to be smaller and are able to offer a highly individualized service experience for their membership. Part of that experience includes offering free financial education courses, in addition to offering very competitive rates on loans and deposit interest (also called dividends) rates.

Two main elements differentiate Credit Unions from Banks:

Credit unions are owned by their membership--- If you have an account at a credit union, you're a partial owner of the Credit Union. You can play a part in the decision making process of the Credit Union, which could include sitting on the board of directors. Banks have customers, and they have shareholders; at credit unions, they're one and the same.

Credit unions are not-for-profit--- Because credit unions are owned by their membership, they are financial cooperatives. This unique, not-for-profit business structure helps credit unions offer competitive interest rates and generally lower fees. Any profits made by credit unions are distributed as dividends to their members, or used to create additional products, services, or branches - all for the benefit and convenience of the membership. Credit unions also have a unique structure for the board of directors: they're all volunteer and unpaid. In contrast, banks are governed by a paid board of directors and must earn a profit to satisfy their shareholders.

The misconception that you must belong to a special group to join a credit union is slowly becoming a thing of the past. You can actually search for credit unions with open membership by visiting www.joinacu.org.

With Credit Unions boasting over 85 million members across the United States, the trend towards consumers seeking individualized service options from organizations that are tailored to fit their financial goals is on the rise.

Pacific Oaks Federal Credit Union has five locations in Ventura County, and is firmly committed to serving the financial needs of anyone who lives or works in Ventura County. To find out how we can help you achieve your financial goals, please visit us at www.pacificoaksfcu.org.