Keeping an eye on the credit union scene. Dopico and James A.
The Key Difference There is really very little practical difference between a commercial bank and a credit union. Structurally, and dare I say philosophically, they're very different. A credit union is a financial cooperative, owned by the members who have deposits at the bank. A credit union is created for the benefit of its members.
All depositors are owners, regardless of balance, and get a vote in board member elections. A commercial bank is a for-profit institution, often times traded on the stock market. They are owned by shareholders and look to turn a profit for those shareholders.
A depositor is merely that, someone who deposits their money at the bank.
The bank's goal is to earn as much of a return as possible on those deposits. It's about their responsibility. Both are responsible to their shareholders.
The difference is who is a shareholder at each institution. A depositor is a shareholder at a credit union. A depositor is not a shareholder at a commercial bank, the folks who own shares of stock are the shareholders. Understanding this key difference can inform the other differences.
Eligibility Requirements A commercial bank has no eligibility requirements. A credit union, by law, must have a restriction based on affinity membership to an organizationgeography, or some other affiliation.
Once you qualify, you qualify for life even if the affiliation changes. Here are its eligibility rules: It was called Teachers Federal Credit Union but you didn't have to be an educator or work in the school system.
By comparison, almost anyone can walk into a Bank of America and open an account. They can sometimes get around this by joining ATM networks so their reach is that much greater. They don't have a presence outside of the region though.
Not all credit unions have a limited geographic footprint. Navy Federal Credit Union has nearly branches in cities and thirty states.
As you can see — they have a pretty big geographic footprint for a credit union. They, however, can still be relatively small compared to a commercial bank.What is a Credit Union?. How is a credit union different than a bank?
Credit unions are not-for-profit organizations that exist to serve their members. Like banks, credit unions accept deposits, make loans and provide a wide array of other financial services. At credit unions and small banks, service tends to be more personalized. With fewer customers and employees, it may be easier for everybody to get to know each other.
If you visit a branch, there’s a good chance you’ll work with the same people, and you may develop relationships.
Credit unions are not-for-profit organizations that exist to serve their members. Like banks, credit unions accept deposits, make loans and provide a wide array of other financial services. But as member-owned and cooperative institutions, credit unions provide a safe place to save and borrow at reasonable rates.
Bank vs Credit Union comparison. While banks and credit unions are both financial institutions that offer similar services (checking and savings accounts, auto loans, and mortgages), the main difference between a bank and a credit union is that 'customers' of a credit union are members, a.
Credit unions beat regular banks but still can't compete with the economics of online banks.
Lower interest rates on loans. I compared auto loans at Tower Federal Credit Union (a local CU to where I live now in Howard County, Maryland) with Bank of America and found a big difference.
Credit unions' financial powers have expanded to include almost anything a bank or savings association can do, including making home loans, issuing credit cards, and even making some commercial loans.