FAQs About Credit Unions
NC Credit Union History
Frequently Asked Questions About Credit Unions
What’s A Credit Union?
A credit union is a community-based, member-owned financial institution. Credit unions do not exist to make a profit, but rather to serve their member-owners. Any earnings the credit union makes are returned to the membership in the form of lower loan rates, higher deposit rates, and much lower fees.
How do credit unions work?
Credit unions are funded by their members, who place their money in checking, savings, money market and other deposit accounts. There are no outside investors or shareholders. The funds loaned by credit unions to members are literally the money of other members.
The Seven Cooperative Principles
Credit unions operate using Seven Cooperative Principles:
- Voluntary and open membership – no discrimination.
- Democratic member control – one vote per member.
- Member economic participation – the more you use the cooperative, the more you benefit.
- Autonomy and independence – credit union members elect board members who set policy.
- Education, training, and information – credit unions provide financial education.
- Cooperation among cooperatives – credit unions work together to improve services and build sustainable communities.
- Concern for community – since they are local, credit unions invest in your community.
What Are the Advantages of Credit Unions?
Credit unions are the best choice for consumers in the marketplace! They are owned and managed by their members, do not have outside shareholders to pay and their board of directors are not paid. As a result, credit unions offer the best value in the marketplace.
How Many Credit Unions Are There in NC?
There are approximately 87 credit unions in NC that hold $33 billion in assets. About one in three residents of NC belong to a credit union.
Can I Join?
Most people can find a credit union to join. Check out the web site A Smarter Choice to see if there is a credit union near you.
Are Credit Unions Convenient?
Yes! Even though credit unions tend to be smaller, locally-based organizations, they work together nationwide to provide the same services you would expect from a large bank – only much less expensive. For example, here in NC, the Cashpoints ATM Network offers access to nearly 1,100 ATMs statewide to all credit union members at no charge! Many credit unions also have relationships with ATM networks nationwide, providing members with free, nationwide access to their funds.
Some credit unions also participate in Shared Branching, which means members can transact business at more than 5,300 locations nationwide as if they were still at home.
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History of NC Credit Unions
(Note: this historical information is provided for credit unions to use in educating their staff, volunteers and members. For more information, please contact Jeff Hardin.)
John Sprunt Hill, the “Father of Rural Credit,” played a huge role in the development of the credit union movement in NC. Hill, who traveled to Europe in 1913 to study the thriving cooperative societies there, returned to NC eager to use the cooperative principles to help family farmers in NC.
Hill, a native of Duplin County, was a banker and lawyer who committed his life to improving the lot of farmers in NC. Farming in the state had fallen on hard times in the decades following the Civil War.
Farmers in NC faced a variety of problems a century ago. Money was tight and getting access to credit was very difficult. As a result, many farmers would borrow money to pay today’s bills using un-harvested crops as collateral (known as the crop-lien system). The crop-lien system came with interest rates as high as 50%, causing many who could not pay back the debt to lose their farms.
Reverend R.H. Whitaker wrote about the abuses of what he called the "crap-lien" system in NC some 100 years ago. His book, Whitaker's Reminiscences, Incidents and Anecdotes, provides a clear picture of how this system worked to take advantage of the family farmer in NC.
Upon returning to NC, Hill set out to bring credit unions to the state. He wrote the McRae Rural Credits Act and furiously lobbied the NC General Assembly to pass the bill. In 1915, the bill made it through the legislative process and became the sixth state credit union act in the US to be passed.
Not content to simply lobby for the passage of the bill and go home, Hill struck out across the state, speaking to farmers in communities from the mountains to the coast. Using soaring rhetoric, Hill encouraged farmers to come together and use cooperative finance to transform their lives. Shortly before Christmas in 1915, Hill spoke to a small group of farmers in the Durham County community of Lowe's Grove. Inspired to act, 16 farmers combined to deposit $101.75 and charter the Lowe's Grove Credit Union in January 1916 - the first credit union to be organized in the state, as well as the Southern US. The credit union operated out of a small frame building. A state historical marker is located at the site where the building stood.
African American farmers, who endured profound racial and economic discrimination in the Jim Crow South, enthusiastically embraced the concept of mutual self-help using cooperative credit as well. Thomas B. Patterson of Landis (Rowan County) brought 22 African American farmers together on April 19, 1918, to organize the Piedmont Credit Union. Piedmont was the state's first credit union organized by African Americans.
Like many early credit unions of its day, the Piedmont Credit Union provided a vehicle for farmers to not only save and borrow, but also pool resources to buy supplies for their farming operations. The credit union also provided a vehicle for members to run for leadership positions and elect their own directors - at a time when African Americans were restricted from voting in state and federal elections by discriminatory laws on the books at that time.
In the publication Southern Workman in 1920, Patterson writes a vivid account of the activities of the Piedmont Credit Union and the impact of cooperative finance on African American farmers.
From these modest beginnings, the concept spread throughout the state so that by 1920, 30 credit unions had been organized in the Tar Heel State. Credit unions helped farmers gradually break the hold of the crop-lien system and solve many of the crushing problems they had previously experienced.
Over time, credit unions spread from the family farm to businesses including mills and factories, postal facilities and telephone companies. These credit unions helped everyday people gain access to credit and transform their lives for the better. More recently, credit union membership rules have changed to allow more people to join. This has brought the credit union "people helping people" philosophy to more-and-more Tar Heels in recent years.
Today, there are about 87 credit unions in NC that serve 3.3 million residents of NC - or about one out of every three North Carolinians. Despite this incredible growth from humble beginnings, credit unions still exist to serve. To find out how credit unions are meeting the needs of their members, please visit our People, Not Profit section of testimonials.
For more information on credit unions you may be able to join, please go to www.asmarterchoice.org.
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