When Jeremy Treadwell needed a car loan, the recent college graduate turned to the financial institution where he'd been banking for nearly seven years. "But they turned me down,†says the 23-year-old, "because I didn't have any credit history.†Treadwell, who lives in Peoria, Illinois, noticed signs around town for Citizens Equity First Credit Union. Says Treadwell: "I got a great rate. But then I noticed their other services. Now I do almost all my banking there: checking, savings, credit card, and, of course, my car loan.†Treadwell's experience isn't unusual. Although credit unions have been around at least since the 1930s, when President Franklin D. Roosevelt signed them into law, many people stumble onto them because of their attractive loan rates or higher savings interest rates. So, what exactly what are credit unions, and how are they able to offer lower rates? Credit unions are cooperatively owned by the people who open accounts with them. Those people are called members, not customers. Some even distribute profits to members as an annual bonus or dividend. Unlike many banks, which are governed by paid boards of directors, credit unions are led by elect volunteer boards. In general, credit unions serve a defined membership that has a common bond, usually an area of residence, business or type of work, place of worship, or affiliation with certain organizations. Despite these requirements, almost anyone can join a credit union. To find a credit union near you, go to www.creditunion.coop. Credit unions are not-for-profit. With no obligation to generate profits for shareholders, credit unions look out for members' interests and exist to help people save and invest more efficiently. These entities return profits to members by providing better savings rates and lower loan rates as well as charging fewer and lower fees. Because they are not-for-profit, credit unions are exempt from federal and most state taxes and can pass on this savings to members. They also provide a level of customer service usually not found at other financial institutions. But, according to senior financial analyst Greg McBride of Bankrate.com, credit unions do not typically provide wealth management, brokerage, or mobile banking services. Credit unions are similar to banks in that they offer a range of financial products and services, though smaller credit unions tend to offer fewer services. On average, credit unions charge lower loan and credit card interest rates and offer higher savings rates (see chart). Because credit unions often serve the inexperienced and underserved, their services tend to be more accessible to those looking to establish themselves. Treadwell likes the savings account at his credit union, where he's been a member for about a year. "I'm saving for a variety of things,†says the graphic designer, who recently got engaged. "At my credit union, I can split up my savings account and label the categories.†Treadwell's credit union offers a kind of starter certificate of deposit, which a member can begin funding with a low deposit, say, $25, instead of needing the minimum $1,000 up front. The member can keep adding to it until the certificate is fully funded–all the time earning the same 12-month rate–and rolled over into a regular 12-month certificate. Your money is safe in a credit union. Deposits with all federal credit unions are insured up to $250,000 by the National Credit Union Share Insurance Fund; most state-chartered credit unions are also covered by the fund. Other state-chartered credit unions' deposits are privately insured by American Share Insurance. Credit union members tend to be more satisfied with services. According to a study by Forrester Research, 70% of credit union members surveyed said their financial institution puts their interests first. The entities consistently outperform banks in areas such as quality of support and ease of conducting business, according to a recent report by the Filene Research Institute, a credit union research organization. At the same time, Americans have lost faith in banks. A recent Pew Research Center poll found that more than two-thirds of consumers have an unfavorable opinion of large banking institutions. It's not surprising that credit unions have enjoyed steady growth. Figures from the Credit Union National Association show that membership growth from 2004 to 2008 averaged 2.3%; in 2009, even after a year of financial tumult, membership grew 2.25%. During that same five-year period, savings in credit unions grew from more than $570 billion to more than $690 billion. Credit union assets have steadily increased as well: In the last 10 years alone, they have more than doubled–from $422 billion to $904 billion. None of this surprises Tonita Webb, vice president and chief human resources officer at Seattle Metropolitan Credit Union. Five years ago, the 40-year-old went strictly credit union and hasn't looked back. "When I began working for Metropolitan, I fully understood the credit union philosophy and knew I wanted to be part of it.†While Webb and her husband served in the U.S. Air Force, she was a member of a military-affiliated credit union. After they both left the military and moved, Webb assumed she was ineligible to retain her membership, but that was not true. More than 1,600 credit unions participate in the CU Service Centers shared branching network, making it possible to bank at nearly 6,400 branches nationwide. Members of participating credit unions can find a shared branch at www.cuswirl.com. According to Webb, credit unions operate by core values that serve their members. "We provide members with financial education and a plan to improve their financial standing. We won't approve loans our members can't afford.†Among the principles that guide credit unions are education and training including financial education for members' children and teens, and a commitment to local communities. Many credit unions provide access to free financial planning services, including retirement planning and debt and credit counseling. Despite the many advantages of banking with a credit union, some members do encounter drawbacks. Treadwell, for instance, says that technologically his credit union is rather behind the times. "The online banking offerings are not as extensive [as his former bank's]. Overall their communication technology is somewhat antiquated.†You won't find a credit union branch on every corner, and some have a thin ATM network, though many refund fees charged for using other ATMs. But Treadwell says the customer service is sublime. "I'm charged fewer fees overall, and my credit union is much more forgiving. If I ran into a problem with my former bank, they could never reverse the fees, but here the customer service is more personal, and though I'm responsible with my money, they seem to understand that sometimes life happens.†Webb says smaller credit unions don't advertise because they have smaller marketing budgets and they're more interested in using their money to serve the members they have. "Serving our members is what credit unions are all about.†This article originally appeared in the June 2010 issue of Black Enterprise magazine.