October 1974: The month credit unions got checking accounts (sort of)
This ran in the Sunday business section of the Minneapolis Tribune on October 20, 1974. That was my hometown paper when I was a kid in Richfield. Im certain I read the sports page cover to cover that day, but I dont remember this one. I found it recently while digging through old newspaper archives.
That month, NCUA let three federal credit unions, in Michigan, Georgia and California, test something called share drafts. It was a six-month pilot that let members write checks against their interest-bearing share accounts. If it worked, all 12,000 federal credit unions might get the same authority.
What strikes me is why they wanted it. The worry wasnt checking accounts. It was electronic funds transfer, the new technology that let banks offer the payroll deduction that had long been a credit union advantage.
Donald MacKinnon, who ran Dearborn Federal Credit Union for Ford workers and was one of the pilot participants, said EFT was going to do away with some of the advantages credit unions have had for years.
In Minnesota, the head of a large state-chartered credit union put it even more plainly: We cant expect to rely on loyalty like we have.
The story also noted the Minnesota Bankers Association might oppose the idea. That turned out to be an understatement. Five years later, the bankers sued (I know - shocker!!), and a federal appeals court struck share drafts down. Congress made them permanent in 1980. More on this to follow.
Fifty-two years later, swap EFT for fintech and that 1974 quote still holds. Credit unions have been told their advantages were going away for a long time, and they keep adapting.
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