Credit unions are not-for-profit entities. This means that all money that is earned is not distributed to stockholders; it’s instead invested back to the organization’s initiatives and members, or owners! Every individual that uses a credit union’s services owns a “share” in the company. In other words, credit unions are owned by their members.
The business structure of a credit union is to serve its members rather than to maximize profits. Since credit unions are member-owned, promoting the betterment of their members and the communities they serve is what they operate on.
You might be wondering then, “How do credit unions stay in business?” If so, you’ve come to the right place! Credit unions do make money, but the money that is made is used differently than you might think.
We’re going to break it all down for you with a few examples of how credit unions use profits and talk about how some of these examples apply to Pelican State Credit Union!
Charging Fewer Fees
A big portion of profits that are generated for large national banks comes from fees—transfer fees, overdraft fees, and ATM fees. Because credit unions don’t pursue earning a profit, they generally don’t charge as many fees as banks do for the same products and services (which means you, the consumer, are more likely to avoid these fees all together).
Instead, credit unions pass along the money that they do make from fees back to its members. This practice is often called “cycling.” Cycling, in this context, means that profits made are returned back to the members in ways that directly benefit them.
Offering Better Rates
Whether you are looking for a car, house, or debt consolidation loan, a credit union can often provide a better rate than a bank. Since CUs are more focused on their members and not on driving up profits, they are often able to achieve this.
Should you get a debt consolidation loan?We break down whether or not it’s a good idea for you in this episode of #AskPelican!
Pelican, for example, achieves impeccable member service one rate at a time. While Pelican is often able to keep interest rates low, it also frequently keeps dividend rates high!
Credit unions generally provide high, competitive dividend rates as well. Because profits are cycled throughout the company, a credit union paying you back to bank with them is not an outlandish practice.
Check out these current rates* and see for yourself!
Working with All Financial Situations
A credit union is often more willing to work with you if you don’t have the best credit. Potential borrowers with less-than-ideal credit can usually confide in a credit union because again, their main goal is to serve the member.
Think of it this way. A main objective (if not THE most important objective) of a company is to grow. By maintaining the purpose of solely servicing members, a credit union will inevitably experience growth.
It becomes a snowball effect. When we’re helping and lending to members, those members then tell their friends, this turns into more members, which turns into the ability to offer and maintain low interest rates. This snowball effect is why a credit union is often more lenient and more willing to work with all financial situations.
Busting Credit Union Myths!When we say ALL financial situations, we mean all of them! Check out as we bust this myth and more in our FREE eBook, The Big Book of Credit Union Myths BUSTED!
Pelican State Credit Union offers a Financial Wellness program*, where you can sit down with a Nationally Certified Credit Counselor to go over all your options based on your financial situation. In addition, they will create a plan with you to help you reach financial success in the future. This is a completely free service to Pelican members!
Member Service Expansion
Credit unions also use profits to grow internally. The money that is leftover after they’ve provided for the members goes directly back into the company, allowing for more growth.
Internal expansion at Pelican has translated into new Pelican locations and team members!
In 2018, a brand-new Pelican branch opened its doors in Hammond, and a second branch location in Opelousas opened its doors in 2019. Additionally, construction for Pelican’s new Corporate Campus, including another branch for our members, is in progress and is expected to be completed in Baton Rouge in 2020!
In July 2019, Pelican reached the exciting milestone of staffing 300 team members! That number is only expected to grow, as is the number of members the credit union serves, which is now over 50,000.
Internal expansion is important for credit union members because it means more convenience, more accessibility, and less wait times on the phone and in line at the branches.
Service isn’t just something credit unions do—it’s who they ARE! Community involvement—things like events, promotional giveaways, and local business sponsorships—is a key factor as to how credit unions use their profits. Credit unions understand the importance of giving back to the communities in which they are located.
Throughout the year, Pelican hosts community events across the state of Louisiana. These events are held so people can have fun, enjoy themselves, and see first-hand how Pelican serves its communities. Anyone is welcome to attend Pelican’s community events, as membership is not required.
The heart for service that credit unions are structured upon is put on full display through community involvement.
If you have any other questions about credit unions and how one can benefit you, let us know in the comments!
*You have the right to a free credit report from AnnualCreditReport.com or 877-322-8228, the ONLY authorized source under federal law. Credit counseling is intended to give you the financial education you need to make informed decisions. Results may vary. Pelican and its employees are not responsible for any claim, suit, action or damage resulting from credit counseling.