Celebrating International Credit Union Day! - Vested UK

Celebrating International Credit Union Day!

Happy International Credit Union Day to all you lovely people out there! For those of you who don’t know, International Credit Union (ICU) Day was established in 1948 as a way to honor the credit union movement and all its achievements. It’s celebrated every third Thursday of October. 

This year’s theme is all about “Building Financial Health For A Brighter Tomorrow.” And in celebration of ICU Day, we’re diving deep into the history of credit unions and how they came to be. (Hint: They were created to help everyday people build financial health — just like this year’s theme suggests!) Alright, let’s dive in…

How Credit Unions Got Their Start

The very first credit union was established in 1864 by Friedrich Raiffeisen in southern Germany as a way to help poor and working-class families gain access to loans. The credit union movement picked up steam in the late 1800s, spreading throughout Germany and Europe before finally reaching American shores in 1900. 

Alphonse Desjardins is the man responsible for establishing the first credit union in North America where he co-founded La Caisse Populaire de Levis (The People’s Bank of Levis) in Lévis, Quebec. This was in the year 1900. A few years later, in 1909, Desjardins helped Edward Filene establish the first credit union in the U.S. 

Edward Filene is known as the “Father of U.S. credit unions.” He was a successful Bostonian merchant who served as the pioneer of the credit union movement, fighting for legislation in 1908 alongside Pierre Jay, a Massachusetts banking commissioner. 

The duo later went on to establish St. Mary’s Cooperative Credit Association — the very first credit union in the U.S. — on April 6, 1909, in Manchester, New Hampshire, just months after the Massachusetts Credit Union Act was passed. (This act was the first comprehensive credit union law and later went on to serve as the foundation for the Federal Credit Union Act of 1934).

Fun fact: St. Mary’s Cooperative Credit Association still exists today! Check it out at St. Mary’s Bank.)

Decades of Growth: How Credit Unions Continued to Expand Throughout the 1900s

Filene had big plans for credit unions in the U.S. — and he wasn’t just stopping with St. Mary’s Cooperative Credit Association. In 1920, he hired an attorney named Roy Bergengren to help him expand the movement. The two organized the Credit Union National Extension Bureau (an association focused on forming credit unions) and helped enact credit union laws in 38 states and the District of Columbia. 

In 1932, Bergengren began meeting with U.S. senators to discuss the need to organize credit unions under federal law. He believed it was imperative to have a U.S. law permitting the formation of federal credit unions. In one letter to a Texas senator, he wrote: “A federal credit union law would be a sort of blanket insurance policy for all our state laws, giving us an alternative method of organization.” 

Bergengren’s wish came true two years later when President Franklin Delano Roosevelt signed the Federal Credit Union Act of 1934 into law. This act allowed every state in the U.S. to create non-for-profit cooperatives focused on providing accessible banking services to their local communities. And after coming off the brush of the Great Depression, it was a breath of fresh air for millions of struggling Americans. 

Credit unions were highly successful in those early years due to their grassroots nature of being “organized and operated on a cooperative basis.” This design allowed them to help borrowers most during times of financial hardship by giving them access to cheaper loans. 

The credit union movement expanded rapidly after the Federal Credit Union Act was passed in 1934. By 1952, there were nearly 6,000 credit unions in the U.S. serving more than 2.8 million members. By 1960, this number jumped to nearly 10,000 credit unions with 6.1 million members. It hit its peak in the late 1990s when there were more than 12,891 federally insured credit unions with 61 million members and $223 billion in assets.Fun fact: Did you know that credit unions were once supervised by the Federal Deposit Insurance Corporation (FDIC)? It’s true! The FDIC managed federally chartered credit unions from 1942 until the National Credit Union Administration (NCUA) was formed in 1970. Today, the NCUA is responsible for supervising federal credit unions and insuring deposits.

Credit Unions Today: Smaller in Number, Stronger in Power

Today there are over 86,000 credit unions around the globe, covering six continents and serving more than 375 million members. While the number of global credit unions continues to grow each year, the number of credit unions in the U.S. continues to decline. 

Today, there are just over 5,000 credit unions in the U.S. (down from ~12,000 in the late 1990s). But don’t despair — this number isn’t what it seems. Many credit unions have merged and consolidated over the years in an effort to compete with larger banks and offer more services. 

Although the overall number of institutions is smaller, they have more members and assets under management than ever before, serving more than 125 million members and managing almost $1.9 trillion in assets. (For comparison, those 12,000+ credit unions in the 1990s only served a combined total of 61 million members and $223 billion in assets.)

How Credit Unions Differ From Banks

Credit unions are not-for-profit organizations that are owned by members rather than shareholders. You typically must meet some type of qualification to join a credit union. For example, you may need to work with a particular employer, live in a certain geographical location, or join a specific charitable organization. 

Credit unions are widely known for their low fees, high dividend rates on share accounts, and excellent customer service. And thanks to banking deregulations, they offer many of the same banking products you’d find at traditional banks. 

Credit unions are also known for having better customer service — most likely because their board and staff live in the communities they serve and understand their customers’ needs. They typically offer better rates on savings accounts and CDs than traditional banks (although you’ll want to compare both options before choosing one).

Credit unions are a solid alternative to today’s traditional bank. If you’re the type of person who loves to “shop local” and use your dollars to support your community, a credit union could be a good fit for you. 

Fun fact: Credit unions attract a slightly older demographic than traditional and online banks, with the average member being 53 years old

You can read more about International Credit Union Day on the World Council’s website here. Got questions or comments about the history of credit unions? Zip us a line on Twitter

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