If you’re not already a credit union member, you may be wondering what the difference is between your local credit union and your local bank -- and the truth is there are many similarities. We offer most of the same financial products and services, and the money you put in a credit union is insured up to $250,000 by the NCUA (similar to the FDIC for banks). But while we share these commonalities, there are indeed some very substantial differences between credit unions and banks including the way they operate and who they work for.
When you bank at your local bank, the institution is owned by investors and the bank works to make those investors money. When you bank at your local credit union, the institution is owned by the members of the credit union and if you’re a member the institution is owned, in part, by you. Therefore, the credit union is, in essence, working for you.
Where Do The Profits Go?
Another big difference between credit unions and banks is where the profits go. When you’re doing business with a bank, the investors of that bank are reaping the profits of the institution. However, credit unions are not-for-profit entities. When you’re doing business with a credit union the profits of that credit union are being returned to the members of the credit union in the form of better financial products and services. For example, loan interest rates will typically be lower at a credit union than at a bank and checking and savings dividend rates will usually be higher.
There are a lot of misconceptions out there about credit unions. For example, so many believe only an exclusive group of people who work for a particular company can join. While it is true that credit union membership is based on a common bond, a linkage shared by savers and borrowers who belong to a specific community, organization, religion or place of employment, you will find that membership eligibility at your local credit union is more expansive than you might think.
The Bottom Line
While a credit union may not be for everyone, if you sit down and weigh the pros and cons, you will likely find banking with your local credit union... just makes sense.