The Credit Union vs. the Bank
What is the difference between a Credit Union and A Traditional Bank?
If you’re not already a Credit Union member, you may be wondering what the difference is between your local Credit Union and your local bank -- or perhaps you’re not really wondering at all and you assume they’re pretty much the same. You may be surprised to find out that they are indeed some very substantial differences between Credit Unions and banks including the way they operate and who they work for.
Who are the Owners?
First and foremost, when you’re looking at which institution to bank at, you should take a look at who owns the establishment. When you bank at your local bank, the institution is owned by investors and the bank works to make those investors money. When you bank at your local Credit Union, the institution is owned by the members of the Credit Union and if you’re a member the institution is owned, in part, by you. Therefore, the Credit Union is, in essence, working for you.
Where Do The Profits Go?
Another big difference between Credit Unions and banks is where the profits go. When you’re doing business with a bank, the investors of that bank receive the profits of the institution. However, Credit Unions are non-profit entities. When you’re doing business with a Credit Union the profits of that Credit Union are being returned to the members of the Credit Union in the form of lower loan interest rates and higher dividends.
Do they keep your money safe?
Any money being stored in a bank is guaranteed by the Federal Deposit Insurance Corporation (FDIC) and this guarantee is displayed at each and every bank. Credit Unions follow a similar process. Each Credit Union account is insured up to $250,000 by the National Credit Union Share Insurance Fund, which is managed by the National Credit Union Administration.
Who can become members?
A financial institution like a bank or Credit Union can offer their services to anyone who meets the criteria they set for perspective members.
Some Credit Unions have an open field of membership where anyone can join and become a member. Many Credit Unions, however, cannot be joined without first meeting some sort of prerequisite for becoming a member. Subject to the credit union's charter, these can include factors like religion, workplace, geography, and civic affiliation. This is keeping with the "common bond" philosophy of Credit Unions.
What are the overall advantages of joining a Credit Union?
When you’re a member of a Credit Union, you have a say in how your Credit Union is run. A Credit Union is a democratic, member-owned cooperative, and each Credit Union holds an annual election where members select candidates for the Board of Directors. Credit Union elections are based on a one-member, one-vote structure. This is very different from a bank, where stockholders vote according to the number of shares of stock they own.
Also unlike banks, Credit Unions are not-for-profit, which enables them to operate at a lower cost than many for-profit institutions, and helps them to offer competitive loan and savings rates to their members.