It often concerns me when people don’t seem to understand something they should have learned about in high school such as writing a check, balancing a personal budget, and major differences between a bank and a credit union. Sarah Silverman explains why she left her bank for a credit union in a video for NowThis. Just when you thought you couldn’t politicize much more in America, the credit union has now fallen victim to it. There’s a lot of benefits to a credit union. I even advocate switching to them! There’s just one big problem: I don’t think Sarah Silverman or NowThis understand credit unions very well. Before we get too far ahead of ourselves, here’s the video so you can see what I’m talking about.
It’s true that a credit union is a bank that is not-for-profit. It’s true that you are a part owner when you put your money in a credit union and that you have a say in what happens. But Silverman should have really thought more carefully about her delivery of that statement. Sure, you get a say, but it’s just a single vote out of everybody else there. Let’s start with the definition of not-for-profit.
First and foremost, a not-for-profit organization is not the same as a nonprofit organization. Just take a look at the definition given by Investopedia:
“Not for profit describes a type of organization that does not earn profits for its owners. All of the money earned by or donated to a not-for-profit organization is used in pursuing the organization’s objectives and keeping it running. Typically, not-for-profit organizations are charities or other types of public service organizations.” (emphasis added)
Did you catch that part where it mentions that the organization doesn’t earn profits for its owners? It sounds great, right? Before you start cursing those greedy jerks that own the credit union, you should remember that I confirmed something Silverman stated about credit unions: When you put your money into it, you become a part owner. This is also confirmed by Investopedia. So, really, the organization just doesn’t earn a profit for you. The point is that it’s a publicly owned organization (by people in the community) that isn’t controlled by some big corporation.
It’s Only True if it Isn’t False
Silverman claimed that credit unions don’t charge “little fees here and there so they can invest it in stuff like snake oil pipelines,” but she either doesn’t get affected by them like the rest of us or she doesn’t have more than a checking or savings account and maybe an IRA. But why, then, does a popular credit union in the Eugene/Springfield area have a schedule of rates and fees associated with checking and savings accounts? It’s because they do charge fees, just not necessarily in the same way. There isn’t a service charge for accounts, but even a lot of the big banks did away with those 10 years ago. Remember the commercials for “free checking?” Oh, and they totally still have overdraft fees. So don’t try it thinking you’ll get off scot free.
That awesome credit union I was just talking about also publicly releases their financial statements, like this one from 2015. There’s something I wanted to point out in their income statement.
STATEMENT OF INCOME
As of 12/31/2015
|Income from Loans||$45,847,131|
|Income from Investments||$895,818|
|Other Operating Income||$22,380,387|
|Gross Operating Income||$69,123,336|
|Less Operating Expenses||$53,340,677|
|Income from Operations||$15,782,659|
|Plus Non-Operating Gains||$1,094,907|
|Income before Dividends||$16,877,566|
|Less Dividend and Interest Expense||$6,452,382|
Did you notice the second line? In case you missed it, it read, “Income from investments.” Now, you can think whatever you like. But you should understand that credit unions still invest in things like projects and financial markets like bigger banks do. I know, I know, Sarah Silverman made it sound like they don’t. She went as far as saying, “…once you’re in a credit union, you are part of a group of people keeping their money safely in a place that you know will not be invested in things that you don’t believe in.”
As stated earlier, you do get a say in what happens. I mean, you get a say in who becomes president, too. But did that go the way Silverman wanted? The same goes for credit union board voting. While it’s unlikely that her credit union is going to “invest,” which is really just financing in the form of a loan, in oil pipelines, if the issue ever came up and a majority of people voted in favor of it, then her money wouldn’t be “safely in a place that [she knows] will not be invested things that [she doesn’t] believe in.”
Lastly, she gives advice by saying, “Think about where you spend your money; look it up; Google shit.” The only problem is that depositing your money into a bank or credit union isn’t the same as spending your money. Sure, you’re using a financial product. Yes, you’re helping them make money. But you’re not actually spending it. You see, a bank account is a place where you can safely store your money. It’s still your money. The way they make money on it is by loaning it out to people and businesses as well as using it in investments, just like credit unions do. The interest rates on those accounts are their way of paying/thanking you for allowing them to use your money in that way. Don’t worry, there can’t be a run on the banks like in the past since there’s a federal banking rule stating that 10 percent of all deposits must go into reserves.
Beware of the Celebrity Appeal to Authority
Remember what happened this past election? A lot of celebrities got together to try to persuade people into voting against Donald Trump. In the process, they tried to make themselves sound like they were a regular American with just a little more fame than the rest of us. This couldn’t be farther from the truth. Sarah Silverman is apparently worth about $10 million. To put this into perspective, if you gave someone $10 million at birth, they could then live on $100,000 per year from the day they were born until they were 100 years old. According to the Social Security Administration, 50.086 percent of American workers earned less than $30,000 in 2015. Still think she’s like the rest of us?
I just have one question for Sarah Silverman: Did you actually look into this before you misinformed anyone who watches this video? Because you get a lot of the big points right, but when it comes down to the overly politicized points, it seems that you either think people are stupid and will follow you no matter what or you aren’t very informed about the “snake oil pipelines” your credit union is investing in. Feel free to fact check me. I will gladly update my article given that I’m provided with substantial evidence that I was wrong.