Between banks and credit unions: 6 fundamental differences
The same financial services, different core values.
Banks and credit unions have the same purpose: they offer financial services to consumers. However, they are intrinsically different.
This is a topic that we are often queried about on Quora, so we wanted to share with you what it is that distinguishes one type of financial institution from the other.
At a bank, the owners are the shareholders who own the bank’s stock. They receive dividends from their ownership and the Board of Directors and Executive Team report to them. Banks work to make these two groups of people (shareholders and executives) money via profits; they obtain profits from the revenues on loan rates, service fees, commissions and capital investment interest.
When you belong to a credit union you are an owner of a credit union. We do not have stock and we are not on the stock exchange. Instead, when you join a credit union you make an initial deposit that stays in your account until the day you leave (you get it back). You only need to buy one share and the price ranges from $5 to $20 depending on the credit union.
Credit unions stay par to banks for most account services and overall, the rates on deposit accounts are higher, and the rates on loans lower.
Just like banks, we have things like Apple Pay and CardNav, an app that allows you to control your debit and/or credit card (and your kid’s) and you can “turn it off” when you are not using it for added safety. We have start of the art online and mobile banking systems and offer check deposits by phone, just like they do.
While it may be true that some credit unions don’t belong to a shared ATM network, a huge amount of us belong to the Co-Op network, a group of thousands of credit unions across north America that created this networks to share surcharge-free ATMs and even shared branches across the US and Canada. Our ATM network is only second to Citibank’s (yes, we have more ATMs than B of A!).
At banks, personnel are trained to provide customer service to clients. They undergo special training ranging from everyday behavior and transaction processing to special sessions on how to handle difficult customers. They are, in all honesty, very professional about this. However, their approach to helping customers serves the bottom line of: getting through the line at the least possible cost.
Credit unions exist to serve the needs of their clients (called members), and they do so with respect, compassion and empathy because members are peers in a collective enterprise. At a credit union you’ll receive the same professional service and yet, when facing difficulties, at a credit union we’ll treat you better. We’re here to help.
And what’s coolest, because you’re a member, you get a vote. Credit unions are democratically run, so it is a one-member, one vote system.
Credit union members vote in selecting the volunteers who will be in charge of:
- The Board of Directors (the volunteers to help decide the direction your CU is taking); and
- The Credit Committee (the volunteers who review loan applications and approve/deny them).
At banks, shareholders vote too. The difference between them and us is the system. At a bank, one share is one vote. Imagine standing up against a decision at a bank shareholder’s meeting if you have one share and someone else has ten thousand!
Credit union volunteers are a cornerstone of our institutions, people with special skills -investments, accounting, law, finance, technology- who give their time to their credit union’s for free to help run it for the sake of everyone. At OAS FCU we currently have 59 volunteers who help us integrating
- Board of Directors
- Credit Committee
- Nominations Committee
- Supervisory Committee
- Asset/Liability Committee
- Community Relations and Membership Committee
- Governance Committee
- Human Capital Committee
- Technology Committee (and its Cybersecurity sub-Committee)
Banks do not use volunteers. We guess you saw that coming.
Finally, here is where we credit unions truly distinguish ourselves from banks: we care about our members and we help them prosper. This is what we do for you at OAS FCU:
We publish this blog, to educate readers about budgeting, improving one’s credit, world economy, personal finance, cybercrime, and everything money. We are firm believers in financial education; the more you know about using your money wisely, the better off you will be in life.
We have informative websites such as the Path to Success, where you can learn about specific topics divided into three main fields:
- Saving and financial planning
- Borrowing wisely, and
- Planning for retirement.
We also help you protect your money with regular publications of the ‘What they’re up to’ blog article series with the latest in cybercrime and scams. Also, we have a full website dedicated to cybersecurity and online privacy protection.
Through our alliances, we provide bring to you –oftentimes free and if not, always discounted- many special benefits to help you in life, from identity theft protection to mechanical repair insurance, credit builder services and even discounts on theater tickets.
The bottom line
We could go on. There are still many other ways that we distinguish ourselves from our Big Brother Banks. What you have to remember always is that banks provide financial services to fill the pockets of a select few. At credit unions, people help people.