What is a Credit Union?
A Credit Union is a not-for-profit, cooperative financial institution federally chartered and insured. Their not-for-profit structure greatly distinguishes them from the more common financial institutions, banks. By being not-for-profit, they emphasize on member care, needs and value. In particular, South Florida Federal Credit Union strives to support its motto of being "Not for profit, not for charity, but for service."
Credit unions of today share their origins in southern Germany where cooperative credit societies were formed by poor farmers during the mid 1840s. With feudalism gone, farmers were allowed to own land; however, they lacked the finances to purchase land, farming equipment, and other tools essential for operating farms. The struggling farmers had no choice but to seek out credit from existing credit facilities, banks. Unfortunatley, farmers and those of lower or equal social status could not qualify for loans from such credit facilites. As a result, farmers and people of the like were forced to borrow money from unscrupulous money lenders at exhorbitant rates of interest. The birth of credit societies provided a convenient place to save and borrow money at reasonable rates. These societies grew in vast amounts and became known as "people's banks".
By the early 1900s, the "people's banks" were largely established in Europe and, although their idea was spreading worldwide, they were virtually unknown in the United States. Credit Societies were first introduced in the United States in 1907 by a Boston merchant named Edward Filene. He observed various credit societies in the Bengal area of India and instantly knew they had a place in the United States. Mr. Filene and several others, including Roy F. Bergengren, were instrumental in the early development of credit unions on a local level. It was not until the passage of the Federal Credit Union Act in June of 1934 that credit unions became nationally recognized.
Today, the main focus of a credit union is to provide an economical facility for members to save, borrow, and obtain financial services. In most credit unions, loan income represents 85% or more of total income. In contrast, other types of financial institutions rely heavily on member fees. After the credit union's operating expenses and capital requirements are met, the remaining income is returned to its members in the form of higher savings dividendes and low-cost financial services.