What’s a credit union?
Hello. Welcome to the new Mazuma blog. We hope to use this tool to establish a conversation between Mazuma’s team and our Members. The idea is to address concerns or answer questions that a number of our Members might have about all things financial – how to get the most out of your Mazuma relationship, what tools do we have that can make you wiser, wealthier and more secure or just news from the world of Kansaas City and beyond related to credit unions. And the list probably will get larger as you tell us what we should cover.
As a starting point, one question that comes up often is “What’s the difference between a credit union and a bank?” There are a number of differences but most of them aren’t important to daily operations…we look like a bank from the inside and the outside. We offer the same services and products (sometimes more, sometimes – but not often – a little less) but we believe we do it “better.” Of course, better is in the eye of the beholder.
Credit unions are not-for-profit cooperatives. That is…some Members deposit their money and we lend it to other Members. When they pay their loans and interest, we return those earnings back to our depositor Members as dividends on their savings. [side note: I always capitalize the word "Members" when I talk about the folks who belong to Mazuma because that reminds me that they are the most important people in the business. We really try very hard to "Be All About You!"]
Well, don’t banks lend money and pay interest? Yes, but the difference is that the banks give as much of that income as possible to their stockholders – whether it is a family group that owns the bank or investors on the stock exchanges. At a credit union, the Members are the owners so we try to give back as much value to them as possible. We do this is a number of ways: we try to have higher dividends on savings, lower interest rates on loans, lower fees on some products or services and no fees on others that banks might charge for. In 2007 and 2008, in addition to our great rates and low fees, we gave our Members a special dividend of over $1.8 million dollars based on how much they borrowed or saved with us. Have you heard of a bank doing that??
Banks might tell you that the ONLY reason we do this kind of stuff is because we don’t pay taxes. Well, that is a little bit correct. Credit unions are exempt from paying federal income taxes. But we pay state franchise (income) tax, property taxes, sales taxes, some earnings taxes and certainly payroll taxes. In exchange for not paying federal taxes, we don’t pay our employees (we call each other “team” because that’s what we try to act like) quite as high a salary as bankers do, we are limited in who we can serve (only folks who live or work in Jackson, Clay or Cass Counties), we have volunteer Boards of Directors (we aren’t allowed to pay the folks who represent you) and we have to earn every penny of capital/reserves that we keep to protect against bad loan losses and to invest in new facilities and services to our Members. Banks can just get some new investors to contribute new capital and then they can build more branches or install more ATMs, etc.
I know this is getting way too detailed for a first outing, so I’ll stop now. If you have questions about this stuff, let me know. we will be watching the blog for your replies or new questions and will try to answer at least every couple of weeks. Credit unions are all about “people helping people” and this is a fresh way that we can try to help our Members and the greater community. Thanks for reading this blog and please come by our Main Office at 9300 Troost any time to say ”hi” – I would love to meet you….Rob