A state employee credit union in the United States is a member-owned, not-for-profit financial services organization that operates very much like a bank. Like other credit unions, this type was usually begun with the purpose of providing affordable financial services to its intended membership. In many cases, only the employees of the state it’s located in, and their families, may become members. A state employee credit union usually has an informal relationship with the state whose employees it serves, but isn’t an agency of the state government.
A modern state employee credit union is a financial services cooperative with significant resources, often larger than many banks, because of the large population it serves — tens of thousands of state employees. In addition to standard banking services such as checking and savings accounts, members can also access other services such as credit cards, automobile loans, home mortgages and home equity lines of credit (HELOCs). A state employee credit union also offers its members custodial services for IRAs and other retirement savings programs.
While they’re operated on a “not-for-profit” basis, credit unions must compete successfully in the financial services industry and earn more than they spend — technically, a profit. Their mission, however, isn’t to maximize that profit; it’s to deliver banking services to their members at affordable rates. An example of this is the free checking and savings accounts most credit unions offer their members. In addition, loans and credit cards are offered to members at competitive rates, often slightly lower than those offered by more traditional, profit-oriented lenders.
Members of a state employee credit union, in addition to having access to traditional banking services, can usually count on their credit union to work with merchants statewide to negotiate member discounts. Credit unions frequently offer financial advice and education services; the state employee credit union of Washington State, for instance, offers a full curriculum of financial education adaptable for students of middle- and high-school age. Many also prefer credit unions because the interest rates they charge for automobile and other loans are frequently lower than those charged by regular banks.
Credit unions trace their origin to mid-19th century Europe. Most banks at the time operated in urban centers and primarily served the interests of commercial customers and wealthy individuals. Credit unions were formed to serve customers in rural areas, and also attracted those whose assets were insufficient to do business with regular banks.
When credit unions started in the United States in the early 20th century, only those who belonged to identifiable “fields of membership” could become depositors and borrowers. Some common fields of membership include the employees of a particular company, members of a church, or residents of a particular neighborhood. Although some American credit unions voluntarily continue to operate under those restrictions, most operate under much looser membership restrictions. Since 1982, members of the general public have usually been able to find a credit union they can join.