What is the difference between a credit union and a bank, and which one do you benefit from and how?

Answer 1

The Credit Union Difference
Credit Unions For-Profit Banks
Mission
Credit unions are not-for-profit financial cooperatives that conduct business for the mutual benefit and general welfare of their member-owners. Banks are for-profit financial corporations who conduct business to maximize the price of its stock and profit for stockholders.
Philosophy Credit unions promote thrift, savings and sound credit use to improve member’s lives. Banks focus on what generates profit for the Bank.
Community Most credit unions are locally run as membership consists of specific people from employers, churches, schools or communities. Most banks are rarely locally run. Community banks are frequently sold to larger banks whose home office is seldom in the local community.
Ownership Every member is an equal owner. People who purchase stock are the owners. These stockholders expect a return on their investment.
Leadership Boards of Directors are elected by members. Directors are volunteers, and are not paid. Credit union elections are held with each member getting a single vote. Boards of Directors are elected by the stockholders. Directors are paid and legally bound to make decisions that benefit the stockholders, not the customer. Customers don’t have voting rights and have no authority in the overall governance of their bank.
Federal Deposit Insurance Insured by the National Credit Union Share Insurance Fund (NCUSIF), a Federal government agency. Insured by the Federal Deposit Insurance Corp. (FDIC), a Federal government agency.
Taxation Credit unions are exempt from corporate income tax because they are not-for-profit cooperatives that return earnings back to members in the form of lower loan rates and higher deposit rates. Credit unions pay property, county, school, municipal, and employer taxes. Banks are taxed because they are designed as profit-making corporations. When they disburse profits, it is only to their stockholders.

Answer 2

as many here have stated, a credit union is like a small company owned by its members, usually requiring a investment from its members (such as a share purchase). A bank is a bank - duh!

It gets tricky though right here. In a bank, if there is a war or some other disaster (like a hurricane etc) that devistates the economy, your money is protected. By that I mean if you had $100 dollars before, you will still have that $100, regardless of the real world value that becomes (it could really be worth almost nothing because the cost of goods could skyrocket uncontrollably)

A credit on the other hand does not give you that promise. If there is a war and they shut up shop, they may take your money with them, and just pay out dividends on the shares. This could mean if you had a share of the credit union that was worth $5, and you had $100 in your account, you could walk away with only $6 - or less than that!

However don't let that discourage you. Most credit unions are tied to big companies and this does help keep them honest - and they do tend to be a much friendlier and cheaper way to keep your money. It is a gamble, but a small one.

Answer 3

A bank is open to anyone. The person is charged for all the services unless they have an account type that requires a minimum balance. The interest, if any, on the checking and/or savings is very low.

A credit union is a membership program, usually open to specific groups or organizations. Members buy shares with their deposits. They offer some of the same services as banks but not CD or IRA. The interest is significantly higher.

Usually people deposit money each paycheck directly into the credit union, which could be the entire or part of their paycheck. While if you deposit your paycheck into your checking account, it is the entire amount.

Banks are insured by FDIC where Credit Unions have a different insurance policy. Banks are there to make profit on the loans. At a credit union they make profits but those are given back to the members in a form of lower loan rates and dividends.

Both are good financial institutions. And you can have both!

Answer 4

Good definitions have already been given. Some differences/benefits I've noticed include:

1) More ATMs and branches for my bank, so my bank money is more accessible to me

2) Online banking has been slow to come for credit unions, but is getting better

3) My credit unions often some extra perks, like discount tickets for the state fair and some area tourist spots.

4) I feel more comfortable having more savings accounts for specific savings purposes at the credit union. Opening deposit requirements are lower. Plus, since there are fewer brances and ATMs for the credit union, it's that much easier to save.

5) Customer services is generally a little better at the credit union.

Answer 5

Well some credit unions you can access all over. Like I have a account with Visions and I can use my bank through HSBC and a few others but cant remember which ones. But like some of the others have said too, banks are all about THE BANKS PROFITS. Credit Unions are more fore the customer. Obviously no matter where you go they need some profit or else they get shut down. In my opinion it is better to go through credit unions because you will get better service and it works out better for you usually.

Answer 6

A credit union is owned by its members. When the credit union makes money, the members get bonus payments. Members can arrange loans for worthwhile purposes (starting business, school expenses, medical bills etc) much more easily because they have a vested interest in the credit union.
A bank is a commercial enterprise, whose sole purpose is making money. But they are making it FROM you and FOR the corporation who owns the bank. Interest rates are higher at a bank, mortgage rates are higher at a bank, service fees are higher at a bank.
Are you getting the picture?
The really nice thing about credit unions is that you, as a member, have the opportunity to vote on policy. You can support environmental issues, you can support local neighborhood initiatives, you can support a favorite charity. Whatever the membership wants is what the credit union does.
Try that with a bank!

Answer 7

A credit union is a private bank. It's set up for employees of a company or many companies to serve as a private bank.

Much like Kaiser Permanete was set up as a heath provider for Kaiser Steel long ago.

Credit unions are insured through a different entity than Banks, not all credit unions may be insursed.

They offer different percentage rates and terms on loans and savings accounts.

The don't underwrite big ticket items like houses, as a rule.

Answer 8

a credit union is not for profit. only members can use their services (with the exception of a couple of things they have to offer to everyone like credit card cash advances) and each member owns a share in the credit union effectively making them an owner. the cu is run by a board of directors that are elected by the members of the cu. (everyone can vote) they're more personable (generally) because they view their members as co-owners. since they're not for profit, extra revenue can be passed back down to the owners in things like higher dividends and lower rates.

oh, and credit unions will still place holds on checks and charge fees. their methods tend to differ a bit from banks though. if you've been a member for, like 20 years and want to cash a check that would normally have a hold they might make an exception. the credit union i worked for didn't have fees for checking accounts or some of the things banks do. they did charge for things like money orders and travelers cheques.

Answer 9

Banks are mainly, if not entirely, run by corporate and large firm investors whereas Credit Unions are owned by the smaller guys, including investors like you and me. Many companys and institutions do have Credit Union memberships available to their employees, and, most of the time, allow immediate family members to join as well. The most benefit you would receive from either one would be the Credit Union since they offer lower interest rates and are more likely to help you in areas where banks wouldn't, like personal loans, mortgages, etc.

Answer 10

Credit unions have bigger dividens but, unless you have a significant account $10,000 or more, you don't have much of a stand as far as voting or member privellages.

So unless you have the money you can do and reap the benefits otherwise you could start an online money market account with Capitol One for example with no minimun CD and a 4.6% return rate which is higer than any saving you will open at any bank or credit union branch.

SO IF YOU BROKE ONLINE ACCOUNTS ARE THE WAY TO GO!!!

Answer 11

The differences are blurred now. At one time, a credit union was a very local financial business, where people deposited their savings, and local businesses too, and the manager, who knew you personally, would loan you money, primarily to buy a house, when banks might not be interested in loaning to you. It was, and still is somewhat, a mutual association.
Banks have a much broader scope of business, can make any type of loan, invest money, care for estates, change currency...any financial service needed. They are more of an impersonal business, usually.
I have been a member of credit unions, and a loan is less formal with them, and quicker. However, Bank of America, a very large bank, I have found to be very well run and customer friendly, as my identity was stolen 2x this year, and they helped me in an expedient and friendly manner which was quite pleasant, and I told them that.
So one bank is not just like another. I deposited cash money in Citizen's Bank, and they tried to tell me that I could not withdraw it, I finally got it, but it was trouble. So ask people what their experience is with a bank or credit union.