The Real Difference Between Credit Unions And Banks

We see banks on every corner. On the other hand, credit unions are thought of as savings and loan institutions that are not as prestigious as banks. However, in reality they are the best kept secret in the world of financial institutions. But don’t let me influence you. Here are some characteristics that distinguish the way that banks operate as opposed to credit unions.

1. Who owns them? Banks are owned by a group of investors. They decide the policy and administer the work of the bank. Banks are organizations that look to make a profit so that the investors can recoup a return on their investment. Credit unions are owned by the members. The board is made up of volunteer members who want to serve their fellow members. As shareholders in the credit union, each member gets a vote and has a voice in policy making decisions that affect their money.

2. Do they keep your money safe? Any money being stored in a bank is guaranteed to be there by the Federal Deposit Insurance Corporation (FDIC) and this guarantee is displayed at each and every bank. Credit Unions follow a similar process and are 100% secure, but the Credit Union National Association (CUNA) is the organization backing them up.

3. Who can become members? A financial institution like a bank or credit union can offer their services to anyone who meets the criteria they set for perspective members. Banks do whatever they can to get as many people as possible highly interested in doing their banking with them. This process helps banks build an ever growing customer base, but the people who sign up for accounts do not always decide to stay with the bank.

Credit unions are not open to the general public like a bank is. Credit unions choose members based on many factors: geography, workplace, religious affiliation, and civic associations. There is a credit union out there for everyone if you look long enough. The small selection of members allows them to offer better services to those members.

4. Are they friendly? Banks do what they can to attract new customers, but their real loyalty belongs to the investors in charge of the bank’s care. This is why their customer service often waxes at the time you open new account but wanes quickly.

Credit unions work to keep customers happy. After all, the customers are the shareholders. Credit unions are not for profit, so any funds that do not go to operating and other financial costs are funneled back into offering lower interest rates on loans and higher yields on CDs and money market accounts.

Offering unsurpassable customer relations skills and interest rates that are just plain better, credit unions are a notable threat to banks. Banks, however, have more money supporting them and are therefore able to offer bigger and better incentives to their customers. Deciding whether to store you money at a bank or credit union involves making an informed decision that relates to your personal situation.

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