At the credit union, we always stress the term “Member”, instead of :Customer”; why is that? The answer, though simple,really gets to the issue of why a credit union is  different from a bank. Both types of institutions exist to serve the financial needs of their patrons. The biggest single difference is the BOTTOM LINE. Banks are for-profit organizations that exist to channel profits back to a group of stockholders. Unless you own stock in the bank, you do not get the benefit of sharing in the banks’ financial success.

Credit unions are not-for-profit financial institutions. We exist to serve the people who are the depositors in the credit union . That’s why we refer to your deposit as a “Share” because you own an equal part of the success of the credit union. When you borrow from the credit union you are, in effect, borrowing from your friends and neighbors.

Back to the “not-for-profit” designation. Credit unions serve a closed group of people – in our case people who live, work or worship in 15 South Dakota and 5 North Dakota counties – but most credit unions serve smaller groups, like city employees, or employees of a certain company, etc. Banks are free to serve anyone who walks through the door. Some people are confused with the “not-for-profit” label; it is not the same as non-profit (which is generally reserved for charitable organizations). Not-for-profit really defines our tax status under the Federal Credit Union Act of 1934 as a tax exempt organization. As such, we are exempt from most federal and state taxes relative to the income generated by the credit union. That income – in the form of dividends paid to our members – is taxed at the individual level. The credit union does pay other taxes like city/country property taxes on our branches, federal payroll taxes, road use taxes on our vehicle, among others. The notfor- profit designation also defines our business model. Since (unlike a bank) profit is not the prime focus of the business, we can generally offer our services to members at a reduced rate. Profits generated over and above the cost of providing the services to the members are held in Retained Earnings. These retained earnings build up over time and become “Capital”, which is used as a “rainy day” fund to offset potential losses or support the future growth of the credit union.

Another significant difference for credit unions is in the democratic involvement of the members. Each member has a say in how the credit union is governed; most notably through the Annual Meeting. The membership elects a Board of Directors who are responsible for setting the policies under which the credit union operates. The Board, in turn, hires a professional management team to oversee the day to day operations. The board consists of unpaid Member volunteers who typically serve for 3 years at a time. This volunteer status also sets us apart from other financial institutions who have paid members of the board. These volunteers are the heart of the credit union movement, and they serve not only on the Board but also on the Supervisory Committee which has responsibility to insure that the credit union is operating within the bylaws and federal/state regulations.

Volunteers are the heart of the credit union movement

So, our bottom line really is different from a bank. We are a financial cooperative with members who get together to serve each other and help each other prosper; or share in the hard times. Our services are very similar to almost any other financial institution – savings, loans, online banking products, debit/credit cards, mortgages, and, of course, agriculture loans. We’ve been part of the community since 1957, and have passed the $40 million asset mark.

One final note about membership and the credit union: the strength and growth of the credit union is tied to current and future generations of members. If you’re a member, make sure the rest of your family joins. Get your children and your grand-children to be part of the credit union spirit, and benefit from the cooperative financial service model that is Dakota Plains Federal Credit Union!

 

 

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