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History of Credit Unions

March 1, 2024 4 mins

A credit union is a not-for-profit financial institution. Like a bank, a credit union accepts deposits, makes loans, and offers a variety of other financial services and deposits — and your money is insured. In this article, you will learn the history of credit unions and why they’re important to their communities.

Origins of the credit union

Members of a credit union share a common bond, or “field of membership”: they may all share the same employer, reside in the same geographic region, or belong to a group such as church, school, or labor union. Today nearly 40% of Americans have a credit union membership.1 The first successful credit unions, however, were started by Hermann Schulze-Delitzch as cooperatives in Germany in the mid-1800s. These co-ops guide the spirit of credit unions today: they required a bond of association and were based on values of honesty, openness, social responsibility and caring for others.
In 1901, the first North American credit union opened in Quebec — the first deposit was 10 cents — and St. Mary’s Cooperative Credit Association, the first US credit union, opened in New Hampshire in April 1909. The Massachusetts Credit Union Act that year was the first general statute for establishing credit unions in the United States.
The Credit Union National Extension Bureau, established in 1921, promoted the philosophy of credit unions and worked with states to establish laws to charter credit unions. Between 1921 and 1935, 38 states and the District of Columbia enacted credit union laws.
After the financial crisis that caused the Great Depression, lawmakers agreed it was time to organize credit unions under federal law, and in 1934, President Franklin Delano Roosevelt signed the Federal Credit Union Act into law, with the first federally chartered credit union opening in Texarkana, Texas, in October 1934.


Profits made by credit unions are returned to members in the form of reduced fees, higher savings rates and lower loan rates.”

The Federal Credit Union Act

The Federal Credit Union Act allowed credit unions to be organized throughout the United States under charters approved by the federal government. The federal law intended to make credit available to Americans and promote thrift through a national system of nonprofit, cooperative credit unions.
The act established the federal credit union system and the Bureau of Federal Credit Unions, now the National Credit Union Administration (NCUA), to charter and oversee federal credit unions. Under the Federal Credit Union Act, a credit union may be chartered under either federal or state law, a system known as dual chartering. Federal credit unions are considered “instrumentalities” of the United States, according to the IRS.

The importance of credit unions now

In the years since the Federal Credit Union Act was passed, credit unions have evolved. They are larger and more complex, and continue to provide financial services to millions of Americans — including financial education and outreach, in-school credit union branches, and small business support.
Credit unions are different from banks in that they are not-for-profit organizations owned and controlled by the members who use their services. Members also elect a volunteer board of directors to manage the credit union.
Profits made by credit unions are returned to members in the form of reduced fees, higher savings rates and lower loan rates. Additionally, individual accounts are insured up to $250,000 by the NCUA. (Bank accounts are insured by the FDIC.)

Patelco Credit Union

Patelco was established in 1936 by employees of the Pacific Telephone and Telegraph Company (now AT&T). As a not-for-profit, Patelco can support our members in ways that traditional banks do not. For instance, during the COVID pandemic, Patelco:

  • Approved 700+ mortgage deferrals
  • Approved 9,400+ consumer loan deferrals
  • Distributed over $5 million in member relief loans
  • Waived over $700,000 in fees
  • Helped over 10,500 members during this economic crisis

We continue to put the needs of our members first. Our “People, Not Profits” philosophy is part of everything we do. Patelco provides:

  • Quick access to your money when it works for you, with access to the latest online, mobile and phone banking services, plus local branches and access to over 30,000 ATMs nationwide
  • Loan solutions for every stage of life, whether you’re just getting started, or ready to buy your dream house
  • Great rates and a variety of money market accounts and IRAs to help you get where you’re going
  • Complimentary financial advice with no obligations of any kind — our Certified Financial Specialists’ first priority is you, not collecting fees or selling products

At Patelco, we want you to meet your financial goals. Become a member today — there’s no fee to join and your membership includes a no-monthly-fee savings account with $1 to get you started.

1 Statista, “Number of members of credit unions in the United States from 2013 to 2022,” updated October 4, 2023


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