What’s the difference?

We all know that not all things in life are created equal or the same. Differences among people, places, things and businesses keep things interesting. And in today’s economy, the differences among financial institutions often lead to people deciding where to “bank”.

Do you understanding the difference between banks and credit unions?  If you’re looking to get the best bang for your money, you may want to consider credit union membership. But don’t banks and credit union’s do the same thing, you ask? In principle and theory, yes, they do. They both offer similar products and services but there are differences are behind the scenes in terms of how each operate.

Banks, plain and simple, are for profit organizations. That means they are a commercial business and are in business to make money. They need to generate profits for their stockholders and pay their board of directors. They make extra money by charging more fees and having more stipulations about how various accounts operate. For example, you may be charged a fee if you write too many checks in one month. You may be charged a monthly “privilege” fee to have a debit card and so on.

As a bank customer, you’re just that – a customer. You don’t have any say in how the business operates if you are not a stockholder.  You put your money into an account and abide by the rules of doing business with that financial institution.

Credit unions are the perfect alternative for consumers. Credit unions are not-for-profit entities that operate without a profit motive. There are no stockholders. Individuals who serve on a credit union’s board of directors are volunteers – they’re not on the payroll. Every single person who has an account at a credit union is a member as well as an owner and is treated equally, no matter how much money you have or don’t have.  That means the member-owners have a voice in how the credit union operates. Credit unions return any income to their members in the form of lower loan rates, low or no fee services and often better savings rates.

As financial cooperatives, credit unions work together, not against each other. For example, credit unions join together to form various alliances such as the Surcharge Free CO-OP ATM network and Non-Surcharging ATM network. They also work hard at educating their members through extensive financial literacy programs so that consumers are more educated about managing their money.

Both types of financial institutions offer federally insured deposits. Bank deposits are federally insured up to $250,000 by the FDIC, a government agency. Credit Union deposits are federally insured up to $250,000 by the National Credit Union Administration, a government agency.

If you’re looking to switch financial institutions and as banks do away with free checking and tack on additional fees, consider the alternative – credit union membership. You are eligible for credit union membership if your employer or asosciation offers credit union membership as a benefit or if you live, work, worship or go to school in a select geographic area in which a community-chartered credit union exists.  And once you’re a member, you’re always a member, no matter if you move, change jobs or life situations.

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: