What’s the difference between a credit union and a bank?


Mature couple enjoying in the park.
They both have money, tellers, ATMs and similar products and services. While all things financial may appear to be quite similar, rest assured there are a few significant differences that set banks and credits unions apart when it comes to how each respective financial institution operates. Where you do your “banking” is your personal choice. We just thought you may like to know the differences between banks and credit unions in the event you’re looking for a financial institution or if you’re not happy where you currently are. Making an informed decision as to where to take your hard-earned money is important for your financial future. Take a look at the differences between banks and credit unions:

Banks:

  • Generate profit for stockholders, Make decisions based on what will give stockholders more profit.
  • They are commercial businesses. They offer services to make a profit.
  • People who buy stock in the bank own shares of the business
  • Serve customers from the general public. Anyone can use a bank.
  • Their Board of Directors are paid a salary. Daily operations are performed by a paid staff.
  • Only people who own stock can vote for the Board of Directors. The customers who use the bank do not have a say.
  • Income is returned to the stockholders in the form of higher dividends on their shares of stock.
  • Like other for-profit businesses, banks must pay taxes to the government.
  • Deposits are federally insured up to $250,00 by the FDIC, a government agency.

Credit Unions:

  • Are not for profit, not for charity, but for service. Without a “profit motive,” they make decisions based on what’s best for their members.
  • Are financial cooperatives. Members pool their savings to provide low-cost loans and low-fee services to each other.
  • Each member is an equal owner regardless of how much money they have on deposit.
  • They exist solely to serve their members. To be eligible to open an account and use the credit union’s services, an individual must meet current membership eligibility requirements within their field of membership per the credit union’s charter.
  • Unpaid volunteers elected from the general credit union membership serve on the Board of Directors and guide the credit union. Daily operations are performed by a paid staff.
  • As owners, members elect fellow members to serve on the Board of Directors.
  • Income or profit is returned to the members in the forms of better savings rates, lower loan rates, and low or no fees for services.
  • Like other not-for-profit institutions, credit unions are exempt from paying federal income tax.
  • Deposits are federally insured up to $250,000 by the National Credit Union Administration, a government agency. The NCUA’s insurance fund is the healthiest of all federal deposit insurance funds.

If you’re looking for a place to do your “banking” and you’re not a member, consider Members 1st Federal Credit Union.

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