If you’re curious about the differences between credit unions and banks, you’re not alone. The biggest difference is in their core objectives: The guiding principle of credit unions is service to their members, while banks exist to maximize profit for their stockholders.
Credit Unions v. Banks
|Tend to pay higher interest rates, have lower loan and credit card rates, and have lower fees||Tend to pay lower interest rates, have higher loan and credit card rates, and have higher/more fees|
|Funds are insured by the NCUA up to $250,000||Funds are insured by the FDIC up to $250,000|
|Owned by members||Owned by stockholders|
|Boards of Directors are democratically-elected by members; each member is entitled to one vote regardless of the amount of money they have on deposit||Boards of Directors are elected by stockholders only; those owning the largest number of stocks are entitled to the largest number of votes|
|Often have lower minimum balance requirements||Often have higher minimum balance requirements|
|Sometimes have defined fields of membership based on geographic location, employer, profession, educational institution, or place of worship||Open to anyone who can meet balance requirements|
|Dividends issued to members||Dividends issued only to stockholders|
A credit union is a cooperative financial institution, owned and controlled by the people who use its services. These people are members. Credit unions serve groups that share something in common, such as where they work, live, or go to church. Credit unions are not-for-profit, and exist to provide a safe, convenient place for members to save money and to get loans at reasonable rates.
Credit unions, like other financial institutions, are closely regulated. And they operate in a very prudent manner. The National Credit Union Share Insurance Fund, administered by the National Credit Union Administration (NCUA), an agency of the federal government, insures deposits of credit union members at federal and state-chartered credit unions nationwide. Deposits are insured up to $250,000.
What makes a credit union different from a bank or savings & loan? Like credit unions, these financial institutions accept deposits and make loans–but unlike credit unions, they are in business to make a profit. Banks and savings & loans are owned by groups of stockholders whose interests include earning a healthy return on their investments.