Over the past few decades, credit unions have gained great popularity around the world. A credit union may be defined as a not-for-profit organization established to pursue service delivery to its members rather than maximization of profits (“How is a Credit Union Different than a Bank?” par. 1). Credit Unions are formed commonly by large organizations for the benefit of the employees and clients, who form the membership of the union. The shares, savings, and deposits of union members form a pool of resources that a credit union uses to grant loans, invest, and run overheads. The report’s focus is the Los Angeles Financial Credit Union. The report also covers the types of loans advanced, and the deposit services offered by the union.
Los Angeles Financial Credit Union was founded during the Great Depression in the USA where many citizens had lost trust in traditional banking services. During that period, citizens had a tough time accessing credit facilities and ended up suffering in the exploitative hands of loan sharks. The Roosevelt era made people realize the benefits of joining hands and working together to form unions that would help them during financial difficulties.
The idea of a self-help group introduced by a visionary woman, together with six other people led to the foundation of the ‘Los Angeles Court Employees Federal Credit Union’. The major objective or focus of the union by then was guarding the paychecks of Los Angeles County employees from cunning street lenders. They later merged with the LA County Hall of Records Federal Credit Union forming the Court and Records Federal Credit Union, which now had greater savings, deposits and lending power.
Today, the core of the membership comprises individuals or groups who live, operate, work, volunteer, worship or even school in Los Angeles, California. The Union, which started operations through incubation by the County Probation Department, has now developed into a big credit society with four branches. The credit union conforms to the federal law requirements for financial institutions. For instance, the guidelines impose an obligation of acquisition, verification, and recording of the biodata of every account holder for purposes of curtailing crimes such as laundering money and funding terrorists
The LA financial credit union offers various services to members including savings accounts, checking accounts, insurance, mortgages and loans, VISA, and youth services (“LA Financial Credit Union-Financial Products” par. 1). Members can access low-cost loans that bear zero penalties for pre-payment, automated payroll, deposit account deductions, as well as debt coverage. The loan services offered are as follows:
- Real estate loans: Home loans, home equity loans, and mortgage loans
- Vehicle loans: New and used car loans, boat and personal watercraft, Mechanical Insurance, GAP insurance, Auto insurance, and motorcycle loans
- Secured loans: Mobile homes, Savings, and term certificate secured loans
- Personal unsecured loans: personal loans, Visa, overdraft protection
The loan services are accessible and convenient as members can borrow through mobile phones. The loans cater to various members’ needs and financial abilities. A 6-month loan attracts a 0.05% interest per $1000 dividend rate and an equal percentage of annual percentage yields. A 12-month loan attracts a 0.15% APY/$1000 dividend rate, while the 24 and 36-month loans attract 0.25% and 0.50% APY/$1000 dividend rates respectively.
Savings accounts are of several types. The primary savings account requires a $5 deposit to open an account, and a minimum balance of $500 should be maintained to enjoy a 0.05% ‘Annual Percentage Yield (APY)’. The second account is the Youth primary savings account, which bears no minimum average daily balance, but has an opening balance requirement of $5. The holders of this account are under 18 years.
The third account is the Secondary savings account that attracts a regular saving rate and requires no minimum balance to enjoy a 0.05% APY. However, a minimum balance of $5 is needed to open the secondary savings account. Lastly, the VISA savings account requires a minimum balance of $500 to open and deposits are held to secure the VISA. No minimum daily balance is required in the VISA savings account. Members can use such loans to fulfill a wide range of responsibilities such as paying tuition fees and providing family shelter (“LA Financial Credit Union-Financial Products” par. 1).
The flexibility of checking accounts conforms to the organization’s vision statement of excellence in member service, ‘anytime and anyplace’. Members enjoy free bill pay with all checking accounts, mobile access to all accounts, mobile deposits, and banking around the clock. The types of checking accounts available include community checking, Kasasa cash checking, Kasasa cash banking, Kasasa Tunes checking, Value checking plus, and the Premium checking accounts. The checking accounts differ from those in other financial institutions. For instance, the credit union checking account allows for nationwide ATM refunds if a person meets the qualifications.
The checking account rates at the Los Angeles Financial Credit Union range from 2-6 %, among the best rates in the industry considering the net income. The union is dedicated to providing the members with lower interest rates on the loans, establishing more suitable product services as well as increasing the interests on members’ savings.
On the other hand, commercial banks are owned by stockholders, driven by a profit maximization motive. The expected profit margin is usually 15% or higher to guarantee the bank a return on investment. Stockholders share the profits on a pro-rata basis. Commercial banks in various countries perform special functions such as assisting the central banks to implement monetary policies. The overall value of common equity held by commercial banks’ stakeholders is used as a measure of performance evaluation. There are two categories of commercial banks: wholesale banks and retail banks. Wholesale banks focus on commercial banking and offer fewer consumer loans, mortgages and more business loans. However, retail banks focus on individual and small groups, offering affordable packages of consumer loans and mortgages readily.
Therefore, retail banks are almost similar to credit unions. Members of a bank do not share a common bond, which means all restrictions required to join are eliminated to attract more clients. Traditionally, services offered by banks target middle and high-income persons. On the contrary, credit unions offer competitive rates and fees to members who represent the middle and lower classes of the broader poorer population. Credit unions continue to expand as the individual members enjoy growth and economic empowerment (“How is a Credit Union Different than a Bank?” par. 1).
Individual interests of members are better satisfied in credit unions than at commercial banks. Compared to banking institutions and other money-lending organizations, Los Angeles Financial Credit Union is one of the credit unions that offers beneficial services to the members. The checking account rates of 2-6% are a huge bargain in the United States’ highly competitive corporate market.
LA Financial Credit Union 2014. Web.
How is a Credit Union Different than a Bank? 2014. Web.