Finally, Someone Actually Explains What A Credit Union Is
Sponsored by Unity One Credit Union
Welcome to the Glad You Asked series, a shame-free zone where we tackle topics you’re too embarrassed to ask even your BFF about. Don’t worry, we gotchu.
In many ways, credit unions and banks are the same.They both allow you to open checking or savings accounts and apply for credit cards and loans. But when it comes to how the two operate, the differences are stark.
The differences:
What do the differences mean?
Both banks and credit unions make profits. They do this in a combination of two ways: charging interest on loans and credit cards; investing in mutual funds or government bonds that earn money when the holdings perform well on the market. The difference is in who benefits from these profits.
Banks are for-profit corporations run by a board of directors. They use customer deposits to earn the most money possible, and the profits go to shareholders who purchase stock in the bank.
Credit unions, on the other hand, are not-for-profit institutions run by a volunteer board of directors whose purpose is to serve the members. When you join a credit union, you become a member and are thereby entitled to profits in the form of higher savings rates, lower interest rates or low-cost services.
Benefits of a credit union
Credit unions are more community-oriented than banks. To join a credit union, a member must be part of another shared group like an employer, school or geographical area. This group connection and the member-owned organizational structure encourage decisions that benefit members, not executive shareholders.
For example, actual credit union representatives tend to review loan applications and have a personal discussion with the member based on their needs and financial situation, while most big bank applications are rigidly evaluated by a computer program.
There have to be downsides to credit unions too, right?
There are trade-offs. Since credit unions return profits to members, they may have fewer ATMs and can lag behind big banks in implementing new technology. That credit unions don’t offer online or mobile banking, or that they charge high fees for using ATMs are simply misconceptions. And as credit union membership grows nationwide, so does their ability to offer these services.
Making your choice
Deciding between a bank and a credit union comes down to your individual needs. Consider the benefits and drawbacks of each option and identify your values. What is most important to you: better savings rates or frequent ATMs? Community support or banking by machine? Make a list of priorities and research the options available in your area.
If you live in the Dallas-Fort Worth area, check out Unity One for all the benefits of a local credit union.
