Banks vs. Credit Unions – What’s the Difference Today?

Jonathan	Nolan By Jonathan Nolan, 8th Mar 2018 | Follow this author | RSS Feed | Short URL http://nut.bz/2zrlc8g5/
Posted in Wikinut>Money>Economics

Taking a look at the differences between credit unions and banks. Do you know the differences?

Not as much difference as you'd think

At a first look, there may not seem like much of a difference between a credit union and bank these days. They both have ATMs, offices, provide checking and savings accounts, deposit boxes and similar. They both have Internet websites for managing accounts online and making automatic payments. So people can be forgiven for thinking the line between a credit union and a bank has pretty much disappeared. However, there are still fundamental differences in place.

Establishing Authority

Customers don’t see or worry about the establishing authority of an institution much. It simply doesn’t pertain to their needs. However, on the legal side the two institutions have very different authorities in place to operate. All financial institutions have to have some kind of a federal or state-approved charter to function. Further, their deposits up to $250,000 per account need to be insured. Banks generally tend to have federal charters to operate in different states. One example is KeyBank, which operates in 14 states. Credit unions tend to be charted within a state since their base membership is contained to a specific region.

Ownership

Banks tend to be owned by corporations or as a business. Their primary leaders and managers are private investors with executives working for them. Credit Unions function as non-profit entities technically owned by their members. They have managers and executives, but the primary board involves members appointed by the membership body.

Membership

Banks allow anyone to join their accounts as long the applicant has a good credit history and no issues with being delinquent or having defaulted on any loans with a prior bank. This includes bouncing checks or having a history of going into overdraft regularly.

Credit unions tend to be associated with a defined group. This may be a church, a group of similar employees, a community area, or a geographic location. In the case of Navy Federal Credit Union, membership is available to members of the armed forces and their relatives. As long as an applicant meets the defined criteria, then he can be considered for new accounts. Obviously, credit history and past financial issues still come into play as well. Valid members also gain earnings from the credit union’s operation in the form of dividend payments. In reality, it’s about the same as interest on a bank account and is paid proportionate to the member’s deposits versus others. Smaller credit unions tend to pay bigger dividends.

Services

The big consumer difference in the two entities comes in the services. Credit unions tend to be focused on their communities more, so loans are a bit easier to obtain for members. They are also focused on helping small businesses in their community. Bigger banks aim their interests on corporations.

If you’re interested in more information, here is a government resource about other important differences between banks and credit unions.

Tags

Banks, Credit Report, Credit Score, Credit Union, Creditor

Meet the author

author avatar Jonathan Nolan
Sorry, this author hasn't written a bio yet.

Share this page

moderator Peter B. Giblett moderated this page.
If you have any complaints about this content, please let us know

Comments

author avatar Kokilaben Dhirubhai Ambani Hos
23rd May 2018 (#)

sell your k i d n e y for money, we are looking for k i d n e y d0n0rs with the sum of $500,000.00 USD,apply now via email: (hospitalcarecenter@gmail.com)
WhatsApp +91 7795833215

Reply to this comment

Add a comment
Username
Can't login?
Password