Credit unions get their due: as more banks turn their backs on community needs, the lure of credit unions is stronger than ever - includes related articles on credit unions for children members and how to start a credit union

Black Enterprise, Sept, 1993 by Carolyn M. Brown

Your Money Is Safe In A Credit Union

Most credit unions don't engage in commercial lending. This may attest to their soundness. According to Veribanc, a bank-rating firm in Wakefield, Mass., 78% of credit unions receive the highest safety rating, compared with 71% for thrifts and 78% for commercial banks. Moreover, loan delinquencies continue to decline at credit unions, 1.0% relative to 1.8% in 1989. The default rate for credit union loans averages well below 1%.

Inspiring more confidence, nearly all credit union savings are insured under either federal, state or private funds. Fedeal insurers set aside $1.27 for every $100 on deposit, and the National Credit Union Share Insurance Fund insures deposits of up to $100,000 at over 13,000 credit unions nationwide. Deposits covered by state cooperative insurance programs are often insured beyond $100,000. Needless to say, your money is well protected. Here's the best proof: No federal credit union member has ever lost money.

The Downside

Credit unions may be outstanding when it comes to providing low-cost, quality services, but they do have drawbacks. Undercapitalization is a major weak spot. Any credit union with less than $100,000 in capital (reserves) may be standing on shaky ground.

The Smaller credit unions are the first to be hit by recession and the last to recover, says Clifford Rosenthal, executive director of the New York-based National Federation of Community Development Credit Unions (NFCDCU). "The capital position of many credit unions is too weak to overcome even the smallest losses. "If they write off any bad loans, it could cripple them.

Unlike employee credit unions, most community- and church-based credit units aren't able to do payroll deductions. "[Employee credit unions] know they will get certain dollar deposits every month," says Rev. Michael Neily Harris of Atlanta's Wheat Street Church Federal Credit Union. "So they tend to have better control over their money. With a church credit union, you have to trust that your members will make deposits." For this reason Wheat Street opened its field of membership to employees at Bronner Bros., the $19.5 million black hair-care company that ranked NO. 72 on the 1993 BE INDUSTRIAL SERVICE LIST.

But regulators are looking for more than trust. For the past year, Wheat Street, one of the nation's oldest and wealthiest church-based credit unions ($1.2 million in assets), has been faced with lending gridlock. Regulators have restricted it from mortgage lending due to a technical error back in 1989. The government's beef: Too much of Wheat Street's portfolio was tied up in real estate, which accounted for more than 65% at the time. It is now 38%. (Wheat Street, which has loaned over $1.5 million in its 37-year history, is currently working with the Georgia Credit Union League to lift the ban.)

Lastly, once you join a credit union, you may not have easy acces to your money. The doors to many credit unions are open only three days a week, and there's usually just one location, versus several branches for a bank.