When credit unions were first established, they were cooperatives that helped workers with financial troubles. Now, credit unions are community based institutions which operate as a non profit institution. According to Bankrate.com, "Credit unions have topped the consumer satisfaction ratings in American Banker’s annual survey for 12 years in a row." Anyone in the U.S. can join a credit union. If you want to have an account at a credit union, you are required to have a membership. Members are equal part owners and receive shares based on their contribution. The more one contributes the more shares and profits they receive. The Credit Union Board of Directors are made up of volunteers or elected members from the community. Credit unions promote saving and spending money carefully.
Credit unions will often offer finance education programs to their members. They are also exempt from most state and federal taxes. Credit unions will normally finance community development projects. Interest rates tend to be lower than bank rates. Since every member is an equal owner, service is more individualized and friendly. As well, because of the tax savings and no highly paid administration, they are able to provide such services as: free checking accounts, savings accounts with high interest rates, and low rates on auto loans, mortgages and credit cards. Up to $100,000 of a member’s money is insured and regulated by the National Credit Union Association, which is the same as the Federal Reserve Bank’s coverage. One downside of a credit union is that there are not as many as traditional bank branches.
Banks are owned by a private company and are publicly traded for-profit institutions. The Board of Directors is appointed by the company or shareholders. They are locally based but have numerous branches across a broad region. Rates, fees, and penalties are generally higher than credit unions. They tend to have more of a selection of products and services. Bank account holders will receive some interest on a particular account. Their services are customized to all of their customers and not individualized. The interest rates on loans are generally higher than credit unions. Banks have more ATMs, branches, and investment products and services. Banks tend to finance projects that will give them a big return on their investment.
Both banks and credit unions have government guarantees on a certain amount of funds in a customer’s account, making them safe. When choosing between a bank and a credit union, customers have to consider their own unique current and future needs.
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Article Added on Sunday, August 23, 2009
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