These member-focused financial institutions offer a practical alternative to traditional banks.
Most Americans take access to banking and financial products for granted. However, many populations face challenges in accessing traditional banking services. Even Hispanic Americans, the largest U.S. minority population, can have difficulty finding financial institutions to fit their unique needs. However, credit unions offer a practical alternative to banks, with many offering tailored services specifically designed to help underserved populations like the Latin American community.
Hispanic Americans face unique financial challenges
Nearly a third of Hispanic adults in the U.S. do not have a bank account of any kind and/or rely on alternative financial services, such as payday loans, according to the most recent Economic Well-Being Report from the Federal Reserve.
One in ten Hispanics has no relationship whatsoever with a bank or financial institution, while 22% have at least one bank account, but have also used a financial alternative service in the past year. Some examples of alternative financial services include check cashing, pawnshop or car title loans, and payday loans. These alternative services often come with high-interest rates and unfavorable lending terms for consumers.
A Federal Deposit Insurance Corporation (FDIC) survey revealed that in 2017, an average of 47% of Hispanic households with annual incomes of $50,000 or less did not use the most common credit services, such as credit cards, personal loans, mortgages, or car loans.
It remains to be seen if those numbers increase for this year, considering that the Hispanic economy has been among the hardest-hit during the pandemic.
“According to the Pew Research Center for Hispanic Trends, many Hispanics work in retail, hospitality and other service jobs”, says April Lewis-Parks, Consolidated Credit’s Financial Education Director. “These sectors that were hit hardest by the shutdowns”.
59% of Latinos said, in May, that their households had already suffered layoffs or salary cuts due to Covid-19.
Credit unions offer a more personal alternative in banking
Hispanic Americans often have an inherent distrust of traditional banks. Experts say it’s a combination of corporate distrust, language barriers, and feelings of marginalization that lead many Hispanic Americans and immigrants to avoid big national banks.
By contrast, credit unions are nonprofit organizations that provide the same services and products. These member-centric organizations tend to have a greater focus on serving the needs of specific communities and groups. Thus, there are credit unions and organizations that focus specifically on connecting Hispanics with financial services and products.
Network of Latino Credit Unions and Professionals (NLCUP)
The Network of Latino Credit Unions and Professionals (NLCUP) was established in 2006. Its mission is to advocate for the economic inclusion of the Hispanic population. NLCUP has developed an alliance of credit unions that promote the economic development of Latino communities across the country.
Juntos Avanzamos is a credit union designation program that identifies credit unions that are focused on the financial needs of Hispanic Americans and immigrants. There are 108 credit unions in 26 states that have received this designation.
Credit unions that have received this designation:
- Accept foreign personal identification, such as state identification, Matrícula Consular or passports
- Provide affordable banking services, including check cashing, money orders, and loans to build credit
- Customer service in Spanish
- Resources to educate Hispanic consumers on how the U.S. banking system and services work
You can find a helpful list of credit unions that serve Hispanics, by state, in this article from NerdWallet.
Choosing between banks versus credit unions
When choosing a financial institution, it’s important to understand that different types of institutions have unique benefits and drawbacks. Forbes explains these are the most important points to consider about each institution:
As commercial institutions, banks have the resources to invest in technologies that improve their services or make them more accessible to consumers.
Banks tend to have a wider variety of financial products than their credit union counterparts. For instance, a single national bank chain may have a range of different credit cards that offer various reward programs. A credit union may have only one or two credit cards for their members to choose from.
Banks generally have more ATMs and branches, so it’s easier to find one near you. Additionally, banks can offer their services to anyone who meets the right credit profile, while credit unions serve a specific community in their area.
Banks need to have a profit margin, and interest rates are one of their sources of profit.
For the same reason, banks impose more fees on their costumers than credit unions.
Banks do not go out of their way to establish the close relationship between the institution and its consumers that a cooperative inherently brings.
Credit unions are focused and the needs of the community they serve, and that is why customer service and personalized attention are a main characteristic of a credit union.
That means that any profit the credit union generates will be distributed among its members.
As a non-profit, the requirements and fees to use a credit union’s services are often much lower than what you get at a bank on the same products.
Credit union branches and ATMs are usually scarcer and therefore less accessible than banks.
The products offered in credit unions tend to be more limited than in commercial banks. For example, some cooperatives do not offer commercial loans, which is a common product in banks.
Credit unions work through memberships, and their members share a common bond, so you must be part of the community the credit union serves in order to join it.
Consolidated Credit strives to help Hispanic Americans and immigrants understand their credit
Banking is just one aspect of personal finance in the U.S. Another area where the Hispanic population may face unique challenges is with credit. Credit systems vary from country to country, so immigrants can have a steep learning curve when it comes to credit scores and using credit cards.
Consolidated Credit strives to educate consumers about credit and consumer debt. We provide resources in Spanish, to help Hispanic consumers understand this essential tool. Part of our mission is to help underserved populations improve financial literacy and develop better credit habits. We provide free credit counseling in English, Spanish, and Creole.