Credit Union vs Banks Comparison

Ownership and control

The primary difference between a conventional bank and a credit union is ownership and control. Specifically, credit unions are owned and controlled by their members who are also their customers, whereas banks are generally owned and operated by their stockholders.

Board of Directors

Banks are federally authorized by the Federal Deposit Insurance Corporation and a paid Board of Directors is responsible for the decision management of a bank.

Credit unions are insured by the National Credit Union Administration and the sole decision making power lies with the members, who are also their clients. A Board of Directors is elected by the members rather than hiring one, in a democratic one-person-one voting system not considering the amount of money invested in the credit union.

Services

The credit unions possess limited resources, which include only low -interest loans and saving accounts. However, lately they are stretching their services to include checking accounts, IRA’s and credit cards and are even trying to diversify their loan types.

Banks on the other hand provide a wide range of services including operation of the same account of a bank from different places.

Charging of monthly fee

Banks are found practicing the latest trend of charging of monthly fees. For instance, if you have a checking account with a particular bank, you will be charged a monthly maintenance cost unless you have maintained the specified balance.

But the mission of credit union is not profit making. Hence, they do not charge the high fees and finance charges like conventional banks but maintain low cost services and low interest rates for the customers’ convenience.

Loan facility

If you need a monetary loan in the next couple of months, then it is much easier to secure the loan from a credit union, if you are already the member of a credit union. The interest rate is much lower in a credit union than a traditional bank.

High rate of interest

Credit unions provide higher rates of interest on saving account than a traditional bank. Thus, people in general prefer to open a saving account with a credit union and a checking account with a traditional bank. By maintaining a bank account with a traditional bank and an IRA account with a credit union, you can enjoy the combined benefit of both the sectors.

The visions and objectives of credit unions differ from banks, in many ways, like:

• Credit unions are regulated by the “member customers,” whereas banks are owned by stockholders or private individuals.
• Banks are solely focused on profit making to provide a fair return on the owner’s investments. Credit unions also need to be profitable to ensure its existence in the competitive market. However, the members are entitled directly to the profit, which they receive in the form of lower rates on loan or higher rates on savings.
• Banks provide savings and certificates of deposit accounts, whereas credit unions facilitate their customers with share savings, share certificate accounts, and provide the same services.
• The banks offer checking accounts but credit unions offer share draft accounts, which allow members to “draw” on their shares.
• Most credit unions provide free financial counselling for their members by their cooperative staffs on a personal basis, which is rarely found in any bank.
  
  However, whichever financial organization you choose for your financial support, make sure that you are deriving the maximum benefit from it.