Understanding the Credit Union Difference

Credit unions have been around since before the Great Depression. When people of modest means were unable to get loans from banks, a group of people combined their funds together to lend to one another. This same founding principle of “people helping people” is being practiced by credit unions today.

A common misunderstanding is in the word “union”. But don’t confuse a credit union with a “union”. A credit union is not a “union”. A credit union is a group of people who place funds at the credit union they belong to (deposits) so that other people within that group, including themselves, have access to borrowing the funds at a fair and reasonable rate.

Credit unions are not-for-profit financial cooperatives. Members of the credit union benefit from lower loan rates, higher savings rates and lower fees.

The main differences between a credit union and bank:

Credit Unions Banks
Not-for-profit financial cooperatives For profit financial institutions
Members are owners with equal shareholders of the organization with democratic control Controlled by stockholders and paid officials; customers have no voice
Volunteer Board of Directors elected by the members who represent the members’ best interest Paid Board of Directors represent the stockholders’ best interest; no voting privileges for customers
Cooperation amongst other credit unions Other financial institutions are competition
Driven by member service Driven by profits
Return profits to members in the form of lower loan rates, higher savings rates, and lower fees Return profits to stockholders only
Federally insured by the National Credit Union Administration (NCUA) Federally insured by the Federal Deposit Insurance Corporation (FDIC)

 
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