Credit unions have become a fixture in a cluttered financial marketplace. There are currently more than 8,000 of them, with in excess of 80 million members. Their popularity stems from the fact that, while credit unions look and operate a lot like banks, they have some distinct advantages.

After a day of shopping, doesn't all the merchandise start to look the same? The exact phenomenon occurs when you're shopping for the right financial institution. After a while, it's hard to tell one option from another. Each has such minor differences that it's hard to make a sound decision. Credit unions offer a distinct difference, however. And we have greedy lenders from many years ago to thank for that.

Long-time alternative to higher rates

Credit unions were originally created as a financial alternative to predatory lenders. People of modest financial means used to be easy targets for unscrupulous banks, which loaned them money but charged exorbitant interest rates.

To provide an alternative, credit unions formed, allowing affiliated groups of people to pool their money and offer loans at lower interest rates. As they grew in popularity, credit unions were eventually exempted from federal income taxes, which made it possible for them to continue to provide competitive rates against larger financial institutions.

Expanding membership creates convenience

To allow for continued growth, a 1998 federal law relaxed the membership requirements for credit unions. People can now live in a broad-based geographical region or work for a large employer to join one. You're likely to qualify for membership in several different credit unions. Once you join, you become a lifetime member-regardless of whether you continue to meet the eligibility requirements.

As a result, credit unions are nearly as ubiquitous as banks, with an expanding network of branches and ATM locations. Many are consolidating, resulting in some extremely large organizations with the ability to offer a wide range of products and services.

Exceptional service-and protection, too

While credit unions offer fantastic rates and convenient locations, their calling card has always been exceptional service. Perhaps it's a carry-over of altruistic spirit that led to their creation in the first place; but today, these institutions often outperform banks in satisfaction surveys.

One area where credit unions share common ground with banks is deposit protection. The federal National Credit Union Administration insures deposits up to $100,000, which is similar in function to the Federal Deposit Insurance Corporation.

With all these advantages, it comes as no surprise that credit union membership continues to swell. This doesn't sit well with the banking industry, which continues to lobby Congress to strip away the credit unions' federal tax exemption. Their frustration should not be vented at the government, though, but rather at those unscrupulous lenders from many years ago. Those few bad apples led to the birth of the credit unions, and thanks to their low rates and excellent service, it looks like they're here to stay.