The Differences Between a Credit Union and a Bank

 Banks  and  Credit  Unions  are financial institutions that offer a number of services to their customers such as loans and money accounts. Many people do not realize that there are a number of differences between a  bank  and a  credit  union . When deciding if you should do your  banking  at a  credit  union  or  bank , it is important to understand the differences so that you can choose the financial institution that meets your needs.

 Credit  Unions 

When  credit  unions  were first established, they were cooperatives that helped workers with financial troubles. Now, these financial institutions are community based institutions which operate as a non profit institution. According to Bankrate.com, “ Credit  unions  have topped the consumer satisfaction ratings in American Banker’s annual survey for 12 years in a row.” Anyone in the U.S. can join a  credit  union . If you want to have an account at a  credit  union , you are required to have a membership. Members are equal part owners and receive shares based on their contribution. The more one contributes the more shares and profits they receive. The  Credit  Union  Board of Directors are made up of volunteers or elected members from the community. They promote saving and spending money carefully.

This financial institution will often offer finance education programs to their members. They are also exempt from most state and federal taxes. They will normally finance community development projects. Interest rates tend to be lower than bank rates. Since every member is an equal owner, service is more individualized and friendly. As well, because of the tax savings and no highly paid administration, they are able to provide such services as: free checking accounts, savings accounts with high interest rates, and low rates on auto loans, mortgages and credit cards. Up to $100,000 of a member’s money is insured and regulated by the National  Credit  Union  Association, which is the same as the Federal Reserve  Bank’s  coverage. One downside of a  credit  union  is that there are not as many as traditional  bank  branches.

Banks

Banks are owned by a private company and are publicly traded for-profit institutions. The Board of Directors is appointed by the company or shareholders. They are locally based but have numerous branches across a broad region. Rates, fees, and penalties are generally higher than  credit  unions . They tend to have more of a selection of products and services. Bank account holders will receive some interest on a particular account. Their services are customized to all of their customers and not individualized. The interest rates on loans are generally higher than CU’s. Banks have more ATMs, branches, and investment products and services. Banks tend to finance projects that will give them a big return on their investment.

Both  banks  and  credit  unions  have government guarantees on a certain amount of funds in a customer’s account, making them safe. When choosing between a  bank  and a  credit  union , customers have to consider their own unique current and future needs.

Source by Amy Nutt

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The Differences Between a Credit Union and a Bank