If your quizzical mind has brought you here, you’re most likely one of the millions of Americans that is unsure about the differences between banks and credit unions. Quite simply put, credit unions are “non-profit” while banks are “for-profit”.
Now I bet you’re wondering what that means for you.
Both banks and credit unions offer the same basic products; savings and checking accounts, CD’s, auto loans, mortgages and much more. The major differences are who runs the business and how it is run.
Banks are “Big Business” – that’s not a bad thing, it’s just a fact. When you’re dealing with big business, you can easily become lost amongst the masses and transform from a face to a number quicker than you can count your change. Here’s a basic rundown of a typical bank from “behind the scenes”:
- Stockholders buy shares of the bank as an investment to make money
- Banks make money for their stockholders.
- When a bank makes money, the stockholders get a higher dividends on their shares of stock.
- Stockholders only can vote to elect the bank’s Board of Directors
- The Board of Directors is paid a salary
- Banks serve the general populous- you needn’t be special to use a bank.
- Banks pay taxes, just as all other profit driven businesses.
- All deposits up to $100,000 are insured by a government agency- the FDIC (Federal Deposit Insurance Corporation).
Credit Unions are not a charity, and are not making money for stockholders, but are standing for servicing their “members”, since you must join a credit union to take advantage of their services. As a member, you are an owner. Here’s a quick look at the focus of a credit union:
- Each member owns an equal share of the credit union, no matter how much money they have vested in accounts.
- Members merge their savings together with other members to provide low-cost loans and low-fee services to other members.
- The Board of Directors is made up of volunteer members (not paid), elected by the members of the credit union. The Board steers the credit union in the right direction.
- Day to day operations are conducted by a paid staff
- All profits made by the credit union are returned to its members by offering better rates on savings and loans, as well as fee-free services.
- Since credit unions are non-profit, they are exempt from paying federal income taxes.
- All deposits of up to $100,000 are insured by a government agency- the NCUA (National Credit Union Administration).
Now that you know a bit more about the two very similar, yet so different industries, you’ll be able to make an educated decision as to where you’d like to do your “banking” or “credit unioning” in the future.
