It’s important to truly understand how credit unions are unique, different from banks, and why we remain a necessary and extremely popular financial alternative for many Americans. Credit unions, unlike many other participants in the financial services market, are exempt from Federal and most State taxes because credit unions are member-owned, not-for-profit organizations managed by a volunteer board of directors, and because they have the specified mission of meeting the credit and savings needs of consumers.
Ownership
Credit unions are an economic democracy. Each credit union member has equal ownership and one vote — regardless of how much money a member has in deposits or how many accounts they have. At a credit union, every person is both a member and an owner.
Volunteer Boards
Each credit union is governed by a voluntary board of directors, not stockholders. The board of directors are elected by and from the credit union’s membership.
Membership Eligibility
Credit unions cannot serve the general public. People qualify for a credit union membership through their employer, county they live in, friends or family members, organizational affiliations like churches or social groups, or community-chartered.
Social Purpose
People Helping People. Credit unions exist to help people, not make a profit. Our goal is to serve all of our members well, every member counts. Our members are fiercely loyal for this reason. They know their credit union will be there for them in bad times, as well as good. The same people-first philosophy causes credit unions and our employees to get involved in community charitable activities and worthwhile causes.
Products & Services
Credit Unions offer similar or the same type of products as banks, such as: home purchase loans, Home Equity loans, auto loans, RVs, motorcycles, checking, savings, kids accounts, and so much more. People choose to become a member at a credit union because they can offer lower rates on loans, and higher rates on deposit accounts.
WHAT’S THE DIFFERENCE BETWEEN CREDIT UNIONS & BANKS?
| CREDIT UNIONS | BANKS |
|---|---|
| At credit unions, depositors are called members. Each member is an owner of the credit union. | Banks' depositors are called customers. Customers have no ownership in the financial institution, the financial institutions are owned by investors. |
| Since credit union members are owners, each member, regardless of how many accounts they have or how much money they have on deposit, has one vote in electing board members. Members can also run for election to the board. | Banks are owned and controlled by stockholders, whose number of votes depend upon number of shares owned. Customers don't have voting rights, cannot be elected to the board, and have no say in how their bank is operated. Directors are selected by current directors or by large block stock acquisition. |
| Credit unions' board members are volunteers who reflect the diversity of the membership. | Banks' board members are paid, and do not necessarily reflect the diversity of their customer base. |
| Credit unions are local and are organized to serve the interests of its membership. | Banks are open to the general public. |
| Credit unions are not-for-profit financial cooperatives whose earnings are paid back to members in the form of higher savings rates and lower loan rates. | Banks are all for-profit corporations with declared earnings paid to stockholders only. |
| Credit unions focus on consumer loans, as well as services needed by the membership. | Banks focus on commercial loans and account services that generate significant income. |
