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| Credit
Unions |
Banks |
| Are
not-for-profit institutions |
Are profit-oriented institutions |
| Can
serve only those individuals within their field of membership |
Can
serve anyone in the general public |
| Have
members, each person who deposits money has a share of ownership |
Have
customers with no ownership in the organization |
| Members
elect a volunteer Board of Directors to represent their interests |
Have
a paid Board of Directors who represent the owners; customers
do not have voting privileges |
| Democratically
controlled by members |
Controlled
by stockholders and paid officials |
| Are
member service-driven |
Are profit-driven |
| Return
profits to members in the form of lower loan rates, higher savings
rates and free or low cost services. |
Return profits
to a small group of stockholders |
| Are
federally insured by the National Credit Union Administration |
Are federally
insured by the Federal Deposit Insurance Corporation |
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|
A popular misconception is that a bank is the same thing as a credit union, but in reality, they are as
different as night and day. Choosing between a bank and a credit union should reflect your own personal
self interest, and should be decided after examining your particular financial situation.
Banks are the most popular financial institutions. A bank’s primary purpose is to make money for the
investors and for the stock holders. Banks are federally insured by the Federal Deposit Insurance
Corporation. A paid Board of Directors makes all of the decisions for the bank, which are profit-driven
and hold little benefit for the customers of the bank.
Credit unions, on the other hand, are designed to serve a particular group or neighborhood. People who use
credit unions for their financial services are members of the credit union, rather than customers. Since
credit unions are not-for-profit organizations, surplus earnings are returned to members in the forms of
higher dividends, lower loan rates and free or low-cost services.
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Credit unions are insured by the National Credit Union Administration, and are democratically controlled
by the members. This means that members have more say in how the credit union is run, and hold decision-making
power. Members elect a Board of Directors – rather than hiring one – who are chosen to fully represent the
members in making decisions and upholding policies.
Many people choose credit unions over banks because the former allows for lower interest rates and low-cost
services. They like the fact that they are treated as a benefit to the institution, rather than “just another
account number”. The more members who deposit money into a credit union, the higher the benefits to the
existing members. Credit unions are also tax-exempt.
Credit unions typically offer low-interest loans and high-interset savings accounts. Checking accounts, IRA’s, credit cards,
student loans, small business loans and mortgages are also typical services provided by credit unions. Credit
union members usually enjoy higher interest rates on savings accounts. Most credit unions offer ATM cards and
many now waive ATM fees when using an ATM outside of the credit union's network. Some credit unions will even
reimburse the fee charged by other banks for using their ATM with your credit union ATM card.
Many companies – from small businesses to large corporations – have “adopted” credit unions as their source
for maintaining IRA’s and pensions for employees. This is universally beneficial because it makes the company’s
job much simpler, rather than having to deal with multiple institutions, and the employees are not only members
of the credit union, but also owners, as all members of credit unions own a small share of the institution.
A current trend among banks, which is sending more people to credit unions, lies in the charging of monthly
fees or hidden fees for various services. Banks must generate additional revenue from customers to pay their
Board of Directors, executive bonuses and stockholders.
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