Cooperation at the Core of Credit Unions

If you have ever wondered what makes credit unions different from banks, you're not alone. You may have even thought there is no significant difference between credit unions and banks. However, the truth is that credit unions operate differently and offer unique benefits compared to banks.

Banks are owned by shareholders and driven by profit, whereas credit unions are not-for-profit cooperatives owned by their members. This means credit unions prioritize members’ financial well-being over maximizing profits. 

At Piedmont Advantage Credit Union, we adhere to eight cooperative principles that define how we serve our members and communities. These principles are more than guidelines. They shape everything we do, from structuring our accounts to how we reinvest in the people and places we serve.

But what are cooperative principles? In credit unions, these principles represent the core values that benefit you as a member, our communities and our employees.

In this month’s first episode of Headlines and Fine Print, Dion Williams discusses each cooperative principle and how they enhance member experience.

Principle 1: Voluntary and Open Membership

• Credit unions are voluntary, not-for-profit financial cooperatives offering affordable financial solutions to those eligible and willing to accept the responsibilities and benefits of membership without discrimination.

How does this apply to you? You don’t just become a member when you join a credit union. You become a member-owner, which means:

• Access to better rates on loans and savings
• Lower fees compared to banks
• A voice in how your credit union operates

Principle 2: Democratic Member Control

• Credit unions are democratic organizations owned and controlled by their members, with equal opportunity for participation in setting policies and making decisions. Therefore, each member has one vote.

All members share equal standing, regardless of their deposit amount. Members also elect the Board of Directors, who act in the membership's best interest and govern the credit union.

Principle 3: Member Economic Participation

• Members are the owners of credit unions. As such, they contribute to the capital of their credit union and directly impact its financial success. Members realize benefits in proportion to their relationship with their credit union and use of its products and services.

Credit unions most effectively operate when savers and borrowers actively participate. When members deposit money into the credit union, other members can borrow funds. The net interest margin is the difference between the dividends we pay savers and the interest we earn from loans.

Principle 4: Autonomy and Independence

• Credit Unions are independent, self-reliant organizations controlled by their member-owners, not outside stockholders. Credit Unions entering into agreements with other organizations must ensure continued democratic control by the members.

The members and owners of credit unions are one and the same, unlike banks.

At banks:

• Shareholders may or may not also be customers
• The more shares you own, the more say you have

At credit unions:

• All members are member-owners
• Regardless of deposit size, each member-owner has one vote

Principle 5: Education, Training and Information

• Credit unions educate and train members, employees and volunteers so that they can contribute effectively to the development of credit unions. In addition, credit unions provide financial education for their members and the public.

What are some ways that PACU provides educational services?

• This podcast is just one example. Dion covers two important financial topics impacting our members and communities each month.
• Our Certified Credit Union Financial Counselors. We value giving our employees training opportunities that help our members improve their financial well-being.
• The PACU Foundation supports various local organizations that promote financial literacy and assist individuals facing economic challenges.
• The Al Pacu Youth Program prepares the next generation of members for economic success through the MoneyY-ZER Youth Lessons, which teach foundational financial concepts at age-appropriate levels.

Principle 6: Cooperation Among Cooperatives

• Credit unions serve their members most effectively and strengthen the cooperative principles by working with other cooperatives through local, state, regional, national and international structures.

Our December Headlines and Fine Print episode dispelled the myth that credit unions aren’t accessible. The shared branching network and ATM network are the epitome of credit unions working together to benefit members, even if they are outside of the credit union’s local service area.

Principle 7: Concern for the Community

• Credit unions work for the sustainable development of communities through policies developed and accepted by the members. Credit unions seek to achieve a greater good through responsible corporate citizenship.

“Sometimes, our friends at banks don’t like that credit unions are not subject to the Community Reinvestment Act,” Dion says. “However, there is a good reason for it. We are not mandated by regulation to care about our community, yet we do. PACU understands that our responsibility goes beyond just our members.”

One example of PACU’s concern for the community is the PACU Foundation. Through the Foundation, we support local programs that help our communities grow and prosper in more ways than one.

Principle 8: Diversity, Equity and Inclusion

• Cooperatives believe we are stronger when a proactive effort is put forth to engage everyone in governance, management and representation.

In 2019, a movement began to adopt an eighth cooperative principle within the credit union community. This principle coincides with each principle mentioned above. All members are equal, we promote thrift among all members, our democratic governance represents members’ interests, and we embrace the entirety of each community we serve.

To learn more about our cooperative principles, visit our Eight Cooperative Principles page. To learn more about the benefits of becoming a PACU member, visit our website. Previous Headlines and Fine Print episodes are cataloged and available to watch or listen to on our YouTube and Spotify.