This [unedited] guest post is by a student in my EEP100 class (background post).
Please praise/critique/comment on its economic quality and importance to you.
Stephanie Lin says:I've been a Bank of America customer since I was 16. Upon recent changes to increase profit margins in an economic recession, Bank of America has altered fee policies, cut back services, and generally started to annoy me.
In response, I switched to a Northern California credit union. Credit unions are not-for-profit cooperatives that re-invest surplus revenue back into consumer services, such as lower loan rates or higher savings rates, instead of paying stockholders. Being a cooperative, all members are partial owners of a credit union, meaning members are entitled to vote for their board of directors and share in the profits.
The credit union is an example of grassroots economics, a form of business that is often community-based, working upon cooperative ownership and democratic values. Although forms of grassroots economics may at times be time-consuming, they can be efficient in serving local consumers who directly participate in the production of the goods they consume. Cooperative businesses can be bakeries, housing services, grocery stores, and more. Most credit unions have the same services as banks, including ATMs across the state, online banking, phone banking, and Visa check cards. Most people are eligible for credit union membership, depending on where they work or live; all UC Berkeley students and staff are all eligible for membership. In the US, there are over 90 million members who save about $8 billion annually.
Bottom Line: You should take advantage of credit union services and rates if you're eligible. Look into how you can benefit from grassroots economics, investing back into your local community.
7 comments:
First you state that credit unions are not for profit cooperatives, then you state that, being a cooperative, all members are entitled to a share in the profits. Which is true, no profits or shared profits? Do not equate the stated goals (not for profit)with efficiency (low costs) or service. Thomas Sowell makes this point frequently in his writing.
I am not standing up for commercial banks. As a former stock holder in several different banks, I was astounded by the ways that they could lose large amounts of money. I share your frustration at the banks' business practices and agree with Scott Adams (Dilbert's creator and former bank employee) when he calls them bastards. Still we all benefit from the competition of multiple banks and different types of financial intermediaries and we should be free to chose to do business with the organization(s) that best meets our needs.
Jay, non-profit groups, of course, have profits. Don't confuse the already-confusing title.
What makes an institution "not-for-profit" is that they have certain mandates for where the profits must go, back into the purpose for the organization's existence.
Thanks for these comments and clearing up the distinction between "not-for-profit" versus "no profit."
Sorry about the confusing title. I actually didn't give this post a title; "Hate your bank? Go co-op!" was probably someone else's idea. I don't exactly hate corporate banks or businesses. I just wanted to make the point that there are alternative business models that exist that I never knew about myself, until recently.
@all -- apologies. I gave the post the title b/c Stephanie either gave one that was too long or none at all.
Just a clarification: non-profits are different than zero-profits. They can "make" profit, but they do not distribute them (as above). Zero profits (in theory) do not make profits, they sell at cost.
Zero profits don't exist. Well, not for long, anyway.
@Josh -- unless they are monopolies, which is when that "revenue model" is often imposed.
@Stephanie, Nice job overall. Yes, multiple business models are necessary to meet the various needs of heterogeneous populations. I just think that government regulation is sometimes heavey handed and driven by rent seeking businesses.
Bottom Line: The better shopper each individual is the more the rest of us benefit.
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