While both credit unions and banks offer similar products and services (checking, credit cards, etc.), that's about the only similarity. Here are the differences
Credit Union
- Not for profit, not for charity, but for service. Without "profit motive", make decisions based on what's best for members
- Financial cooperatives. Members pool their savings to provide low-cost loans and low fee services to each other.
- Each member is an equal owner
- Exist solely to serve their members. A person must be within the credit union's field of membership, as defined by their charter, in order to join
- Unpaid volunteers from the membership serve on the Board of Directors and guide the credit union
- As owners, members elect fellow members to serve on the Board of Directors
- Income is returned to members in the form of better savings rates, lower loan rates, and low or no fees for services
- Like other not-for-profit institutions, credit unions are exempt from paying federal income tax
- Deposits are federally insured up to $250,000.00 by NCUA, a government agency
Banks
- Generate profit for stockholders. Make decisions based on what will give stockholders more profit
- Commercial businesses. Offer services to make a profit
- People who buy stock in the bank own shares of the business
- The Board of Directors is paid a salary.
- Only people who own stock can vote for the Board of Directors. The customers who use the bank do not have a say
- Income is returned to the stockholders in the form of higher dividends on their shares of stock
- Like other for-profit businesses, banks must pay taxes to the government
- FDIC, a government agency, federally insures deposits up to $100,000