Senate Cents: A Financial Wellness Blog

As has often been said, it can be hard to quantify just how much impact one person has on the world, but financial institutions deal in something measurable: money. What if an entire category of organizations, like credit unions, ceased to exist?

Credit unions save consumers a significant amount of money, $352 million annually in Oregon and Washington alone, according to a 2014 study by ECONorthwest, a consulting firm. That amounts to about $63 per customer in Oregon and $76 in Washington, says Mike Wilkerson, the company’s Portland-based senior economist. Nationally, the average credit union member saves $74 a year, according to the Credit Union National Association.

“The savings come from higher returns on account balances and lower interest rates on loans, particularly for autos and credit cards,” says John Worth, chief economist for the National Credit Union Administration, a federal regulatory agency. Credit unions can offer more competitive rates because as member owned institutions, they don’t need to generate earnings for stockholders. In addition, their not-for-profit status means they’re tax exempt, which reduces costs compared with banks.

Passing Along Savings

“Credit unions are able to pass a great deal of that advantage on to their membership,” Worth says.

Aside from direct benefits to members, Worth says credit unions also benefit the broader community because they force banks to give customers better rates to stay competitive. “When credit unions are in the same markets as banks, banks offer better rates,” he says.

In many ways, banks and credit unions are similar. Both typically offer checking and savings accounts, and customer deposits are insured by federal agencies to equal levels. However, at credit unions, customers become members who may be able to vote for directors and influence policy decisions. Bank customers only have the option of taking their business elsewhere if they disagree with management decisions.

Crisis Survivors

Credit unions seem to be walking that line successfully. Worth says credit unions offered a consistent number of subprime mortgages before, during and after the financial crisis. Because most credit unions held true to their lending guidelines, they didn’t get into as much trouble as banks and finance companies, many of whom followed the subprime mortgage trend right over a cliff.

“That’s what you want,” Worth says. Lenders should “be available and in a safe and sound condition irrespective of the state of the economy,” he says.

Credit unions also appeal to consumers who want a more informal experience than banks may provide.

“I like the idea of cooperative ventures, and that’s what a credit union is,” says Steven Kanner, a graduate student and parent who lives in Cleveland Heights, Ohio. He enjoys chatting with the tellers when he goes into a branch to do his banking. He also appreciates that his money is helping local businesses and residents, “not flying out to distant lands to benefit a few shareholders somewhere else.”

Major Loss

So what would the world be like if credit unions didn’t exist? Economists have looked at the money members save, and extrapolated to see how much that increases their buying power and fosters economic development.

A 2014 study by the National Association of Federal Credit Unions suggests that just removing the tax exempt status of credit unions would reduce U.S. gross domestic product by $14.8 billion a year, and result in the loss of 150,000 jobs annually.

But for Worth, the real impact is at the household level. Credit union members “are getting good, high-quality financial services from organizations they can trust and organizations they can have some control over,” he says. 

This article originally appeared on NerdWallet.