Friedrich, the GOATBanks have one primary goal: profit. Friedrich Raiffeisen said “nah” and decided to build a financial institution that prioritized people over profit.
Enter: Edward A. FileneThis dude saw how credit unions were fighting wealth inequality and brought them to the U.S. where FDR made them Official™
Still Going StrongToday, credit unions are often insured just as much as banks. But instead of lining the pockets of bankers, they line OUR pockets. NOICE.
As you might already know, a credit union is similar to a bank, with some crucial, beneficial differences. Unlike a bank, a credit union is owned by the members, not some random dudes in a boardroom who have a lot of money and will do anything to get more. But not many people know the history of credit unions.
Credit unions are not-for-profit, meaning that any profits they do make go straight back into savings for you. Sounds pretty nice, right? But how did we get here? In a country so focused on making money, how is it possible that a member-owned financial institution focused on balancing income inequality even exists?
History of Credit Unions
As far as we know, the first credit union was called a credit society and was founded in southern Germany by the GOAT, Friedrich Raiffeisen, in 1849.
Fifteen years later in 1864, our dude Friedrich (that’s him to the left) established the first ever rural cooperative lending institution, which is hailed as the first literal credit union in history.
By the time of his death in 1888, credit unions had spread to Frances, Italy, the Netherlands, England and Austria.
Before Credit Unions
The history of credit unions is an interesting one. Prior to credit unions, you were pretty much out of luck when it came to financial institutions that served your needs before the needs of the institution itself.
Banking has been around in some form or another for generations, and that was pretty much the only option before credit unions.
Raiffeisen and others in that time wanted to create an institution that was based on self-help, self-responsibility, equality and solidarity — a far cry from the “values” of banks.
The Birth of Credit Unions in America
The first credit union in North America was founded in Canada with a 10-cent deposit in 1901.
Shortly after, in 1908, the first credit union in the United States was founded in New Hampshire.
The reason? At the time, French-speaking immigrants needed a place to operate financially, and most American banks did not accept their French money. (Rude.)
Growth of Credit Unions
The year after, Edward A. Filene worked with the Massachusetts Bank Commissioner Pierre Jay to establish the Massachusetts Credit Union Act, giving Filene the name “Father of U.S. Credit Unions.” Way to go Filene!
(Also, peep those mustaches!)
Filene went on to continue his work, expanding credit unions until they were just as viable as banks within the United States economy.
After the Great Depression, top government people including senators and credit union advocates met to build laws helping credit unions. President Franklin Roosevelt signed the Federal Credit Union Act into law in 1934, allowing credit unions to help rural America.
The Reasons for Credit Unions
As we mentioned above, credit unions have been consistently founded and expanded to help balance income inequality. Banks, above all else, are businesses. That means that they are, in the end, seeking to make money for themselves, even at the cost of their customers’ well-being if need be.
A credit union is different.
In the 1930s, they helped farmers and rural workers get back on their feet and continued to do so throughout history. In 1951, they received an exemption from federal income tax because of their goal to help people.
Modern Credit Unions
Today, credit unions are more helpful than ever for working-class people. Not only are most of them insured just as much as banks, but the members continue to own the credit unions.
Credit unions were a little slow on the technology front for a while, but they’re finally catching up. Many credit unions now have apps and online banking services available, just like banks.
And, to top it all off, they go a step further to provide financial literacy classes and personalized customer service to ensure you have a solid financial present and future.
The result? A financial institution that works to serve its own people — not like the pockets of stuffy bankers.
Credit Unions vs. Banks
As we’ve already touched on, credit unions are different from banks in several key ways.
Without bankers looking to profit off you, alllllll the profit goes right back to you and the other members. This comes in the form of:
- Lower interest on loans
- Greater interest on savings
- Fewer fees for things like ATMs (or no fees at all!)
- No hidden fees
And it’s not just you who benefits from this. Every single member does. Which means by joining a credit union, you’re encouraging wealth distribution.
How to Find the Best Credit Union for You
You could spend all day (or all week, or an entire month) researching credit unions, or you could use our free tool to make it easy peasy.