While we may look similar and offer the same products and services, there are crucial differences between credit unions and banks. The difference is in ownership, rates and in use of services.
- Credit unions usually serve groups that share something in common, such as where they work, live, or go to church
- You own your credit union. Credit unions are member-owned not-for-profit financial cooperatives dedicated to improving members' lives
- Credit unions usually offer better rates. Credit unions price loans, pay interest on funds you've deposited, and charge nominal fees to provide you with high-quality, low-cost services. Banks generally price products and services to make a profit.
- Credit unions are the only democratically controlled financial institutions in the United States. You and other members elect an unpaid volunteer board of directors to oversee the credit union.
- You earn more on your savings—in some cases up to one percentage point or more—at the credit union
Like other financial institutions, credit unions are closely regulated and must operate in a very prudent and conservative manner. The National Credit Union Share Insurance Fund, administered by the National Credit Union Administration, an agency of the Federal Government, insures deposits of credit union members at federal and state-chartered credit unions nationwide. Deposits are insured up to $250,000 on savings and separately up to $250,000 on IRA accounts.
The average credit card interest rate is four percentage points better at credit unions vs. banks. And credit union auto loans average almost one and one-half percentage points less than banks' auto loan rates. Credit unions emphasize consumer loans and some offer member business loans. Banks offer consumer loans, but really emphasize business loans.
Credit unions are healthy competition for banks. If credit unions weren't here to put pressure on banks to lower their fees and offer competitive rates, banks could charge whatever they wished.
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