That place or organization that helps you manage your finances and take care of banking, is it a bank or a credit union? Both provide checking and savings accounts, offer loans and have a variety of investment options, but there are a few important factors to consider. Learn the differences between credit unions and banks.
That place or organization that helps you manage your finances and take care of banking, is it a bank or a credit union? Both provide checking and savings accounts, offer loans and have a variety of investment options, but there are a few important factors to consider. Learn the differences between credit unions and banks.
What is a credit union anyway?
First, let’s start by defining exactly what a credit union is.
Like banks, credit unions offer products and services to help people manage their finances, such as checking and savings accounts, credit cards, loans, mortgages, business accounts and more.
A credit union is a not-for-profit financial cooperative, which means all money and resources are pooled. For example, money that you deposit at a credit union is pooled with other deposits to provide better rates on loans.
So are banks and credit unions the same thing?
Not exactly. While they offer similar products and services, there are a few main differences between credit unions and banks.
- A credit union is made up of members. Credit union membership is usually based on geographic location or other shared interest (such as military affiliation, medical professionals or other industries). Members can vote and truly have a say in what happens at a credit union.
- Banks have an appointed board of directors. Earnings at a bank are paid out to shareholders (whereas at a credit union they are paid out to members) who appoint paid board members. At a credit union, board members are elected volunteers who look out for what is best for the credit union and its members.
- Earnings are disbursed differently. Banks and credit unions both earn money (in the form of interest or dividends), which is either paid out to stockholders (at banks) or re-invested in the credit union to offer lower loan rates and better products and services (like mobile banking or eSign options).
- One is insured by NCUA, the other FDIC. Banks are insured by the Federal Deposit Insurance Corporation (FDIC) and banks are insured by the National Credit Union Administration (NCUA), which means if they fail, deposits are insured up to $250,000. Both identify, monitor and address risks to help protect the public’s money.
It’s Verve’s goal—in line with the seven Cooperative Principles that guide us—to provide education and information to help our members stay financially fit.
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