Any Difference Between Banks and Credit Unions?
Brought to you by: Breez DeGuzman
When most people think of financial institutions, they think of traditional banks. However, there are other institutions such as credit unions that people can choose. Credit unions and banks: what is the difference between them?
Credit unions are:
* Member owned and operated, generally set up for a specific community of people.
* Run by a volunteer board of directors which is voted on and elected by community of members. Each member has a vote, and ultimately a say, in who is elected to the board.
* Normally insured by the NCUA (National Credit Union Administration) up to $250,000. The NCUA fund is considered to be superior to the FDIC for insuring member’s funds.
* Members of a worldwide network that shares information and resources as a means to better credit unions as a whole.
* Known for keeping money locally so it can support the community.
Traditional banks are:
* For-profit organizations that are set up as businesses and are owned by stockholders.
* Run by a board of directors who are paid, but the only people that have voting rights are investors.
* Normally insured by the FDIC (Federal Deposit Insurance Corporation) up to $250,000, but that amount may be increased for specific reasons or a specific amount of time.
* Members of state or national organizations that refuse to share with each other because they’re in competition with one another.
* Not restricted where they invest member’s money
These differences may not seem that significant, but they may be important if you’re looking for a financial institution.
Pros for using a credit union include being able to offer higher interest rates on savings accounts, lower interest rates on loans, free checking accounts, and fewer penalties for overdrafts and late payments. On the other hand, credit unions have fewer branches, fewer automatic teller machines, and may be difficult to find.
Pros for using a bank include having more products to choose from. They can usually be found outside of your local area, and have more branches, and have more ATMs. On the other hand, banks don’t give the same level of customer service as a credit union, and they will charge higher fees and penalties.
Traditional banks may be more likely to experience the ups and downs associated with the economy, often because they may choose risky investments. Credit unions, on the other hand, are less likely to make risky investments because they have to answer to their owners. Current economic situations aside, credit unions are ranked higher than traditional banks in customer satisfaction and have been for over ten years.
When you’re looking for a new financial institution, you may be wondering about credit unions and banks. Looking at the above, you may have a better idea of which institution is right for you.
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Tags: Banks, Credit Unions, Financial Institution
