Differences between Credit Unions & Banks
Unlike a bank, credit unions are owned, operated and controlled by their members. The main objective of credit unions is to give member-owners an opportunity to save for the future, make intelligent use of credit and use personal financial counseling to effectively manage their money.
|
Because credit unions are not-for-profit cooperatives, they have no stockholders to satisfy. Therefore, credit unions return any profits made back to the members in the form of cost-savings and better service. |
|
Members take an active role in the credit union by electing fellow members to serve on the volunteer Board of Directors and other governing committees. Each member has one vote, regardless of how much money he or she may have on deposit. |
|
Credit Unions are highly organized, closely regulated, operate in a very prudent manner and each account is insured up to $250,000 by the National Credit Union Administration, an agency of the federal government. |
|
Membership in credit unions is free and open to groups that share something in common, such as where people live, work, or attend church, for example. The services of credit unions are the same or similar to those provided by other financial institutions. |
|
Entity |
CREDIT UNION |
BANK |
|
Organization |
Not-for-profit cooperative |
For-profit cooperative |
|
Primary Objective |
To meet member/owner needs |
To maximize profit |
|
Ownership |
All members who are users of services |
Stockholders who may or may not be customers or users |
|
Directors |
Volunteers |
Paid Directors |
|
Decision-Making |
Member-controlled, one vote per member |
Only stockholders vote, one vote per share of stock |
|
Distribution of Net Income |
Dividends issued to members and used for capital development, additional locations, equipment, etc. |
Dividends issued only to stockholders |
|
Community Links |
Owners/leaders reside or have an interest in the community |
Owners/leaders may live anywhere in the world; headquarters could be anywhere in the U.S. |
|
Rates/Products |
Offer better overall rates and lower fees due to the nature of the organization and its dividend distribution |
Rates and fees may not be favorable because of for-profit status |
|
Generation of Capital |
Generated only through income stream |
Generated through income stream and/or issuance of stock |
|
Who Benefits |
Members/owners |
Stockholders | |
|
From The Credit Union Difference a periodical printed by the Missouri Credit Union Association and printed in the Kansas City Star September 2007 www.mcua.org |
