Q: You may get asked this question a lot. What makes a credit union different from a bank?
A: On the surface banks and credit unions can seem very similar. They both offer financial services like checking accounts and loans. The fundamental difference between a credit union and a bank is our structure.
Q: Why are their structures different?
A: Both credit unions and banks have Board of Directors. However, the difference is that while a bank pays their board members, a credit union’s board is volunteers and they are voted for by the membership. A bank’s board is voted on by their stock holders, who are not always even accountholders.
Q: What are some other key differences?
A: Credit Unions and Banks both make money in similar ways, like through the interest collected on loans. The key difference is what they do with those profits. Credit Unions are not-for-profit, while banks are for-profit entities. This means that when a credit union makes a profit, it is returned to its members in the form of lower loan rates, higher deposit rates and lower fees. Bank’s profits are split among stock holders and not account holders.
Q: Talk about a Member vs. a Customer
A: Credit Union members are just that. Their opening deposit is their “share” in the credit union, and they are owners of the credit union. That’s why they aren’t customers. They are part of a cooperative.
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