What Makes a Credit Union Different from a Bank | RBFCU - Credit Union

What Makes a Credit Union Different from a Bank | RBFCU - Credit Union
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What is a credit union, and what makes it different from a bank?
What is a credit union?
Credit unions are not-for-profit cooperatives, owned by their
members
who save and borrow there. The philosophy of the credit union movement is “not for profit, not for charity, but for service.” This philosophy dictates how a credit union differs from other financial institutions. When you
open your account
, you become an owner of your credit union.
Credit unions are focused on people, not profits. They operate by a “people helping people” philosophy that is hard to find at many other financial institutions.
This is reflected in a credit union’s
board of directors
— a group elected from the membership who volunteer their time to set the credit union’s policies. As a credit union member, you can nominate someone for the board, or run for office yourself! In selecting the board members, each credit union member receives one vote — regardless of the amount of money the member has with the credit union. You may also choose to volunteer to serve on various credit union committees.
What is the difference between banks and credit unions?
Like banks, credit unions accept
deposits
and make
loans
— but that’s where the similarities end.
Banks are owned by groups of shareholders who are interested in earning a healthy return on their investments. Credit unions are not-for-profit financial cooperatives, owned and controlled by the people — the members — who use their services. Any excess earnings are returned to credit union members in the form of higher
savings rates
, lower
loan rates
, fewer
fees
, and expanded services.
How are credit unions different from banks?
Credit unions ...
Banks ...
Eligibility
Credit unions ...
... cannot serve the general public; instead people must qualify for
membership
. Membership eligibility can be based on where you work, worship, live, or go to school. If you’re a member of other social groups or organizations, that may qualify you for membership too!
Banks ...
… let anyone become a customer.
Ownership
Credit unions ...
... are member-owned. Every member is equal, regardless of financial investment, and carries one vote in the democratic processes that guide the credit union.
Banks ...
... are owned by shareholders. The more shares you can purchase, the more of the bank you can own, and the more influence you have.
Your Role
Credit unions ...
… allow their members to vote on how the credit union is run. If you have an account at a credit union, you have a share in it.
Banks ...
… don’t allow their customers to have a say in how the bank is run.
Profit
Credit unions ...
... are not-for-profit cooperatives. Earnings are returned to their members — anyone with a share account — in the form of lower
interest rates on loans
and higher
interest rates on deposit accounts
Banks ...
... are for-profit. A bank’s earnings are distributed to its executives and those who own shares or stock in the company. Customers rarely see the effects of profit.
Boards
Credit unions ...
... are governed by
boards of directors
. Board members set the policies and govern the affairs of the credit union. More importantly, they are elected from the membership, and they are volunteers who receive no compensation for their work.
Banks ...
... are run by paid board members or executives who are hired, often from outside the organization and even from outside the banking clientele.
Safety
Credit unions ...
... are insured up to $250,000 by the
National Credit Union Administration (NCUA)
Banks ...
… are insured up to $250,000 by the
Federal Deposit Insurance Corporation (FDIC)
Access
Credit unions ...
... tend to be local and have fewer
branches
, but thanks to
ATM network sharing
, you can use in-network ATMs free of charge at other credit unions and convenience stores.
Banks ...
… are present in most major cities, but if you need to use another bank’s ATM, get ready to pay a higher service charge.
What gives credit unions an advantage over banks?
Volunteer boards
Every credit union is governed by a
board of directors
, elected
by and from the credit union’s membership. Board members serve
voluntarily and receive no compensation.
Ownership
Credit unions are a democracy. Each credit union member has equal ownership and one vote, regardless of how much money they have on deposit.
Not for profit
Credit unions are not-for-profit financial cooperatives. We exist to serve our members, not to make money, so credit unions do not issue stock or pay dividends to outside shareholders. Instead, we return our earnings to members by providing lower loan
rates
, paying higher dividends on deposits, and charging lower fees.
Products and services
Although they vary in size, most credit unions offer the same products and services you’ll see at a big bank — low and no-cost
savings
and
checking accounts
auto and vehicle loans
mortgages
credit cards
business loans
online banking
and
mobile apps
— often with better rates and lower fees!
Financial education
Credit unions provide
educational resources
to their members to help them be better informed when making financial decisions. We not only focus on our adult members, but work to give our
youth
and
young adults
the skills they need to become financially savvy.
‘People helping people’ philosophy
Credit unions are focused on the common goal of providing quality financial services based on a foundation of financial strength and integrity. The philosophy of “people helping people” extends to our employees who become involved in many charitable activities that
benefit the community
Separating Fact from Fiction: 4 Credit Union Myths
Some people mistakenly believe that credit unions are limited, compared to big banks. Even though there are over 5,000 credit unions in the United States, misconceptions about their structure and services still exist. We address four persistent credit
union myths below.
Myth #1: “Credit unions are basically banks with fewer services”
Reality:
Credit unions offer all the same services as big banks:
credit
debit
savings
loans
and more. Thanks to innovations in
online banking
, financial institutions can be big on service — even when they’re small in size.
It pays to be a member. As a member, you own a share of your credit union and share in its success through better interest rates and fewer fees.
Myth #2: “It’s harder to access your money when you bank at a credit union”
Reality:
Credit unions form a
nationwide ATM network
to increase accessibility to your finances.
Online banking
features and top customer service add to the convenience.
Myth #3: “Credit union deposits aren’t insured”
Reality:
Credit union deposits
are
insured — they have a federal or state insurance fund that keeps your money safe.
Did you know?
Deposits at all federal credit unions and most state-chartered credit unions are covered by the
National Credit Union Share Insurance Fund (NCUSIF)
Myth #4: “It’s too hard to switch to a credit union”
Reality:
Making the switch from a bank to a credit union is easier than you might think. Some credit unions even offer “switch kits,” which contain all of the paperwork — including
direct deposit
and
bill pay
— you need in one convenient package.
Source:
It’s a Money Thing
Making the switch: Follow these steps to ensure a smooth transition
Check your eligibility.
Some credit unions require you to live within a certain area or be connected to a certain industry.
Learn more about membership
Fill out some forms.
Reach out to your credit union to see if they have a switch kit, or for additional guidance.
Join RBFCU online
Transfer your funds.
Don’t forget to update your direct deposit information, your automatic debits and your online payments.
Learn how to Move Money
Close your previous account.
Once you are sure all of your banking information has been updated, close your old account.
Source:
It’s a Money Thing
The 7 Cooperative Principles
How do they shape my credit union experience
Credit unions put their values into practice by following these
seven co-operative principles
. This sets credit unions
apart from all other financial institutions,
strengthens the community
and benefits you too!
Membership available to all who are eligible
What it means to you:
No matter what
your financial situation looks like, the door
is open, without gender, social, racial,
political or religious discrimination.
Democratic member control
What it means to you:
You help call the
shots by electing a
board of directors
One member equals one vote. This is
local democracy in action.
Member economic participation
What it means to you:
Better
rates
, lower
fees and services that benefit the entire credit
union. The more that members participate,
the more there is to go around.
Autonomy and independence
What it means to you:
As a financial
cooperative, your credit union is
controlled by real members like you,
instead of outside shareholders.
Education, training and information
What it means to you:
Access to
financial
literacy tools and resources
. Credit unions
believe that education contributes to
personal growth.
Cooperation among cooperatives
What it means to you:
Your credit union
strengthens the cooperative movement
by partnering with organizations that
share the same important values.
Concern for community
What it means to you:
Knowing that
your day-to-day banking translates into
benefits for charities, local businesses and
the entire community
Source:
It’s a Money Thing
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