Banks and credit unions are some of the leading financial institutions in touch with the financial lives of millions of their clients around the world by offering financial services to them. Although both of them may look similar, they have some noticeable differences which make them unique. Some of these are:
- Purpose: Although every organization and business seeks to grow and develop, not all are focused on making profits. This sounds dicey, but consider this: banks are established by investors seeking to make a profit from their venture. So, if profits are not being made over the years, they may pull out. Every decision made by the bank is profit-oriented. However, a credit union does not focus on making profits as the primary goal. Instead, the financial development of its members is the focus. Members cover the cost of running the union.
- Ownership: From the moment an individual opens an account with a credit union, ownership is confirmed. Credit unions are owned by their members, and any critical decision had to be made by them. Banks are different. Customers have little say in making decisions as they usually do not own any part of the bank’s stock.
- Regulation and insurance: Banks are directly regulated and insured by the government. Deposits made by customers are covered up to any amount. The case is different for credit unions. Although the government regulates them, they are not insured by the government but by a government-approved body.
- Financial services offered: Banks and credit unions both offer loans of different interest rates and tenures. However, no credit union offers loans at the high rates which banks use. Loans obtained at a credit union are generally easier to obtain (due to a make-easy policy) and have a softer impact on the receiver. Payment is flexible and can be extended with permission.
- Membership rewards: A person who is a member of a credit union and a bank customer will notice the difference between the two when it comes to rewarding loyalty. A credit union can easily roll out reward programs to reach all of its members -they are small compared to a bank’s. Banks however may not be able to reach every one of their customers with loyalty rewards.
The choice of which financial service provider to join is left to you, but you should go with the one with the best advantages.