Credit Union Philosophy
A credit union is a financial institution that offers all the same products and services as a bank does, but credit unions have a people-first mentality. Credit unions exist to serve their members (banks call them customers), not to make a profit.
Credit Unions vs. Banks
Credit unions and banks generally function the same offering a variety of deposit and loan accounts. However, there are very specific distinctions between the two types of financial institutions.
Member Owned Not-for-Profit
A credit union is run by members who are also considered owners. Members have a vote no matter how much in deposits they have at the credit union and elect a board of directors who are unpaid volunteers. The board works with the members to manage the credit union.
A bank is is a for-profit institution and typically a public company. The owners of banks are the shareholders who purchase company stock as an investment.
Eligibility
To join a credit union and become a member, you must meet certain requirements including (not all are required):
- Employer – you work for a company that is associated with a credit union
- Family – one of your family members is already a credit union member
- Location – you live, work, worship or attend school in a specific geographic area that offers credit union membership
- Group – you are a member of a group such as a homeowner’s association or labor union which qualifies you for membership
A bank is is a public company and anyone can conduct business with them.
Fees and Rates
In general, fees such as overdraft, non sufficient funds and ATM fees are lower at credit unions. Often times, only a small minimum deposit amount is required to avoid fees. Credit unions often offer higher rates of return on savings accounts and lower interest rates on loan products.
Banks charge more fees than credit unions, and the fees are higher. While not 100 percent of the time, banks pay their customers lower interest earnings on deposit products and charge higher interest rates on loans.
Credit Union Difference
Credit unions believe in helping people achieve financial success. They have the members’ best interest in mind and not the bottom line. The “people helping people” philosophy extends beyond just banking products and services. Credit unions are active in the communities in which they serve. Their employees give of their time and resources for the greater good.
