A community development credit union (CDCU) is a credit union with a mission of serving low- and moderate-income communities and is considered by some as the best replicable model for providing affordable capital and financial services in low-income and very low-income areas. Among many things, CDCUs give out the type of small loans that are traditionally unattractive to conventional lenders, proving many with the ability to have access to important financial resources. CDCUs specialize in serving populations with limited access to safe financial services, including low-income wage earners, recent immigrants, and people with disabilities.
In fact, Low Income or Community Development Credit Unions (often used interchangeably) are designed specifically to deliver financial services and capital to low-income individuals and communities. The term "Low Income" is an official National Credit Union Administration (NCUA) designation for credit unions that serve members that earn less than 80% of the average for all wage earners as established by the Bureau of Labor Statistics, or 80% of the area median household income as established by the Census Bureau.
The significant feature of the CDCU is that it is a non-profit financial institution dedicated to—and managed by—the members of a geographically designated area: the board of directors consists primarily of volunteers from the community, they cultivate long term relationships with the community, and combine educational training with capital assets. The main emphasis of this approach is the empowerment of individuals in under-served communities through responsible money management and saving habits. Many credit unions also include platforms for educating low income residents on financial issues which can include hands-on seminars, workshops, and information sessions. CDCUs are of varying sizes and constituencies, in both rural and inner-city areas. They are generally small institutions. As of 1999, over 64 percent of the CDCUs had total assets of under $5 million and over half of these had total assets of under of $1 million. Sixty-five CDCUs had assets of under $250,000.
How much does a family pay? Big banks require a minimum balance to avoid monthly fees, and if you opt for overdraft protection, that adds an extra $30 or more for each underfunded payment transaction. Although most monthly account fees cost less than alternative financial services, like check-cashing, they’re still less than ideal for people with a limited income. For this reason, many credit unions offer checking accounts with no fees, and high yield savings accounts, providing a secure and affordable way for people to keep their hard-earned cash.
Who qualifies? While anybody can open an account in a CDCU, their mission is focused on people who would otherwise be locked out of the financial system. These institutions rely less on credit scores and more on developing long-term relationships with members of the community and helping them gain financial literacy, establish savings goals and build credit. CDCUs target low- to very low- income residents of the commnity which they serve.
How many units? According to the Washington Post, credit unions reached a milestone in 2014 when membership topped 100 million, comprising 43.7% of the economically active population. For example, the Hill District Federal Credit Union has been open since 1970 and provided banking services to 2,768 members who live in the community.