Differences Between Banks and Credit Unions

stephaniemorris26 By stephaniemorris26, 31st Jan 2012 | Follow this author | RSS Feed | Short URL http://nut.bz/3hz1z2kh/
Posted in Wikinut>Money>Current Accounts

This is in response to Mark Gordon Brown's factual article challenge. Hope it's pretty good I don't do this too often.

Differences in terminology

One of the big differences people may notice between a bank and a credit union is the terminology in which they use. For instance at a bank you are known as an account holder where as at a credit union you are considered a member, and being such essentially makes you part owner of the organization.
Other terminology that differs between the two is what your accounts are called. Of course at a bank you have your savings and checking accounts, but at a credit union your savings account is called a share account and your checking is your share draft account.
Personally being a member of a credit union I can say this can be confusing at first if you are used to traditional banking, but you grow accustomed to it.

Profit Vs. Non-profit

Perhaps the main difference between banks and credit unions is their tax status. Banks are a for profit organization while credit unions are non-profit.
Since banks try to profit more they will charge customers higher rates and fees for services and accounts, and customers see little to none of it in return. On the other hand this has it's advantages too. Since they charge so much they also strive to offer better service and features that many credit unions don't have. Many of which are for your convenience, such as online banking, more office branches, and more available ATM's.

Since credit unions run as non-profit it returns it's earnings to its members by way of higher interest on savings accounts and products, and lower interest rates on credit cards and loans. If a credit union were to bring in more money than is needed to operate, it will distribute the overages to all members in the form of dividends.

Say you open a savings account through a credit union, most require at least a $25 dollar deposit be made and kept in the account. At our credit union if we only leave that $25 in the account we still make a penny a month off of it. Doesn't sound like much, but it adds up. We also pay NO fees for any of our accounts. All we have ever paid is the initial $25 to open the account. And last year we had an extra $50 deposited into our account through overages the bank had and split up between members.

Having your own say

Account holders of a traditional bank do not have a vote in the decisions made by their bank. The board of directors makes decisions based on what is best for their stockholders, who by the way do not even have to have an account at that bank, instead of doing what is best for it's customers.
A credit union on the other hand has it's board of directors elected by the members of that union. This gives members more influence, as each member has equal say no matter what amount of money they currently have in their accounts.

Your decision

There are a lot of things to consider when opening a new account anywhere, and I advise doing as much research as possible before doing so. Always remember just because the branch as a whole has great reviews does not mean that your local branch will. Make sure you ask friends and family members about certain local institutions reputations that way you can always make an informed decision.

Tags

Advantages, Bank Account, Bank Loan, Banking, Banks, Credit Unions, Disadvantages

Meet the author

author avatar stephaniemorris26
I am a stay at home mother from beautiful North Alabama. I have 3 wonderful children.12 yr old twin girls and my 2 yr old niece.

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Comments

author avatar Delicia Powers
31st Jan 2012 (#)

Very goo points...outstanding information!

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author avatar stephaniemorris26
31st Jan 2012 (#)

Thank you!

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author avatar Mark Gordon Brown
31st Jan 2012 (#)

Good information on banks and credit unions. More and more people are switching from banks to credit unions and are looking for information on pros and cons of switching to a credit union.

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author avatar stephaniemorris26
1st Feb 2012 (#)

I love our credit union! We may not have online banking and all that but the service you receive is superb! Thank you for suggesting such a topic!

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author avatar Retired
1st Feb 2012 (#)

this is good. Credit unions are devised to be able to dispense ready and ,often, cheap,credit to shareholders owners. Banks offer host of services beyond credit.

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