Banks and credit unions are different financial institutions. Although they offer the same types of services such as checking accounts, savings accounts, and loans, credit unions, and banks have several important differences.
If you trust a financial institution with your money it’s important to know how they operate and how other organizations operate.
1) Banks are privately owned profit-seeking organizations and credit unions are nonprofit organizations owned by their members.
Banks are privately owned and the goal is to make a profit. Credit Unions are owned by their members and non-profit organizations. If you have a bank account you don’t own the bank. If you have a credit union account you are a member and own part of the credit union.
2) Banks and Credit Unions are insured By Different Organizations
Banks are insured by the FDIC (The Federal Deposit Insurance Corporation) and credit unions are insured by the NCUA (National Credit Union Administration). In this tough economy with several financial organizations going under it is important to realize how your money is insured and who is insuring your money.
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3) Board of Directors
Board of Directors governs both banks and credit unions. Banks “board of directors chosen by the stockholders.” Credit union board of directors is “elected by, and from among, those members” of the credit union. In other words, if you are a member of a credit union and meet the criteria to be a director you could be elected to the board of directors. Directors on a bank’s board of directors are often paid for being board members. Directors on a credit union board of directors are volunteers.
Credit Unions generally offer better rates on loans and credit cards since credit unions are not-for-profit organizations. Credit Unions generally pay higher interest on savings accounts than banks as well.
Banks are open to just about anyone. Credit Unions are limited by their charter. However, most people are able to join some type of credit union. The credit union I belong to is open to anyone who lives, works, or worships in Washington County.
My credit union is fairly limited by location. A bank, on the other hand, could have branches across the country which is great if you need to handle banking issues while traveling.