Banks Vs Credit Unions: What's the Difference??
There are tons of small banks and credit unions across the world, and lots of large ones as well. Both banks and credit unions basically provide the same services and do the same thing for their customers (or members), but there are a few inherent differences.
Customer Base or Membership
Many banks allow anyone off the street to obtain an account. Of course, they must provide accurate information, be a certain minimum age, not owe any other banks money, and meet basic requirements such as that. With most credit unions, you must be in a certain field of membership to join. For example, many credit unions are only open to provide services to those employed in a certain industry, such as teachers or police officers in a certain area, to join.
At most credit unions you must open what's called a membership account. This is usually a savings account with no minimum balance where you must purchase your "share" in the credit union for about $5, but it varies from credit union to credit union. The members own the credit union more often than not and are not-for-profit organizations, whereas banks are privately owned and for-profit.
Account holders at banks are often referred to as customers, whereas account holders at credit unions are often referred to as members.
Federal Regulations and Governing Agencies
Banks and credit unions have strict federal regulations with which they must comply. They get audited to ensure they are following policies and can be fined or even shut down if they are consistently breaking rules, conducting business erroneously, or are in debt, to list some examples.
Banks are regulated by the FDIC (Federal Deposit Insurance Corporation), which also safeguards people's money in case the bank goes under or anything else jeopardizes customers' finances. Your money is safe in the bank. Up to $250,000 is insured per account, per account holder. This means if you have three accounts that each have $100,000 in them, all your money is protected. If you have one million dollars in your account, only a certain amount of that will be protected. However, if you have a joint owner on that account, rather than only $250,000 of your million being protected, $500,000 will be protected since you are one owner and there is another account owner, and EACH of you are insured for up to $250,000. I wish I was in the position to worry whether the $250,000 was not enough to protect all my money, but, alas, I'm not...
Credit unions have a similar agency protecting members money: NCUA (National Credit Union Administration). The rules are similar in that up to $250,000 of your money will be protected, in a nutshell. This agency not only protects members' money like the FDIC insures bank account owners' money, it also charters, or regulates, who can be members.
Fees and Interest Rates
Banks often charge higher fees than credit unions. These fees can be for overdrawing one's account, late fees on payments on loans or credit cards, and other things. Also, banks often charge higher prices for official checks, money orders, and other products while credit unions typically set a lower price for these items.
Interest rates on savings accounts and other interest bearing accounts tend to be slightly higher at credit unions, while loan rates tend to be lower. Credit unions commonly re-invest the members' money back into the credit union (to a point) to allow it to be more competitive and offer excellent services and products for it's members.
After reading all this great stuff about credit unions, why would anyone want to go to a bank?? Well, sometimes banks are more convenient. Banks tend to be more widespread and have more locations, however there are a few national credit unions and even some that are worldwide (Navy Federal Credit Union is an example).
Some people are not eligible to join credit unions as they do not meet the membership requirements. Don't despair, though, because even if you're not personally eligible, perhaps someone in your household or immediate family is, and most credit unions extend membership through them. So, if your father works for a company that's eligible to join the credit union, they'd often extend membership to you as well. If you'd like to join a credit union, do a quick search online to see which are available in your area as well as the eligibility requirements. These days, there are a number of credit unions extending membership to the community if you live or work in the vicinity, so check it out and call them with any questions.
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