When traditional banks turned away Black Americans, credit unions welcomed them with open arms.

Different from a bank, credit unions are not-for-profit financial institutions. And Black-led and Black-serving institutions understand the nuances and history of being Black.

They were created for the underserved, says Renee Sattiewhite, president and CEO of the African American Credit Union Coalition. “When banks would not take people, regardless of color, credit unions started to be a place where people of modest means could pull their money together and then loan it out to one another.”

This concept has benefited communities and created a different way of banking. A report from the Federal Reserve found that Black Americans are the country’s least banked racial group. They have the highest rates of being “unbanked” and “underbanked” at 13% and 27%, respectively, and were most often denied or approved for less credit than they requested, regardless of household income.

Black credit unions know their communities’ obstacles, says Dina Hairston, CEO of the Atlanta-based 1st Choice Credit Union. “The benefit when you come to our institutions, or even just a credit union in general, is that a lot of those barriers are removed,” she says. “We look at the full person, the full picture, from the financial standpoint.”

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1st Choice is a minority-owned Community Development Financial Institution (CDFI). Because of its special designation, 60% of the institution’s lending must go to low- and moderate-income demographics or the unbanked, says Hairston. 

There’s a clear gap and historic issue with banking. But credit union leaders focused on serving this population say increasing access to money and opportunities is ingrained in their operations.

“Credit unions are geared toward helping the community,” Hairston says. “We’re really people helping people as a cooperative.”

More than a Customer

Credit unions do not have “customers” like banks do. According to the National Credit Union Administration, they are member-owned — owned and controlled by those who use their services.

Each member owns a share of the credit union and can sit on their cooperative’s board. “That does not happen in a bank,” says Sattiewhite. 

Qualifications for joining a credit union differ by institution. Requirements depend on an employer, location, affiliation to a group like a union or association, or whether a family member is already a member.

This approach is part of the appeal of working with a credit union. 

“Any profits that we turn, we reinvest back into our membership with lower interest rates,” Hairston says. “We don’t have the higher fees that you’re going to see with the banks.” 

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Sheila Montgomery, CEO of Florida A&M University Federal Credit Union, says traditional banking systems are “exclusive,” but Black credit unions “allow us to be inclusive for the communities we serve.”

Florida A&M University is a Historically Black College and University. Its credit union is one of the oldest in the state and the second-largest HBCU credit unions in the nation. Members are alumni, students, employees, and local community members in Tallahassee, Florida.

“Character is important, and in most cases, we know our members very well. We hear the stories, we recognize the stories. In some cases, we live those stories. We’re able to understand that things happen.”

Sheila Montgomery

Financial institutions rely on credit scores to determine interest rates and eligibility for some banking products. Montgomery says this is “risk-based pricing.” Black-owned and -operated credit unions know this factor disproportionately affects their members. 

According to Bankrate, Black communities have fair credit — one step above poor — and the median credit score is 627. Those with fair credit see higher interest rates, unfavorable terms, fewer loan options, more expensive security deposits for housing, and more.

Sattiewhite, Hairston, and Montgomery agree that credit unions seek ways to work with their members instead of denying them opportunities. 

“Most credit unions will operate the same,” Sattiewhite says. “You will find the same level of service or the commitment to be of service. At credit unions, you’re a person, not a number, not a dollar sign.”

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