Reprinted Articles

We see banks on every corner. On the other hand, credit unions are thought of as savings and loan institutions that are not as prestigious as banks. However, in reality they are the best kept secret in the world of financial institutions. But don’t let me influence you. Here are some characteristics that distinguish the way that banks operate as opposed to credit unions.

1. Who owns a credit union? A group of investors are the owners of a bank, and as such they are responsible for decisions regarding business policies and administration. These same choices affect the ability of the investors to make money from the investments they have made in the bank. Conversely, credit unions are owned by their members and the decision making board members are volunteers that give of their time on behalf of other members. Still, each member of the credit union can vote on the policy that is to be followed since it will affect their money.

2. Do they keep your money safe? Any money being stored in a bank is guaranteed to be there by the Federal Deposit Insurance Corporation (FDIC) and this guarantee is displayed at each and every bank. Credit Unions follow a similar process and are 100% secure, but the Credit Union National Association (CUNA) is the organization backing them up.

3. Who can become members? A financial institution like a bank or credit union can offer their services to anyone who meets the criteria they set for perspective members. Banks do whatever they can to get as many people as possible highly interested in doing their banking with them. This process helps banks build an ever growing customer base, but the people who sign up for accounts do not always decide to stay with the bank.

Credit unions, however, cannot be joined without first meeting some sort of prerequisite for becoming a customer. These can include factors like religion, workplace, geography, and civic affiliation. By keeping the total number of members low, credit unions can provide better, more personalized customer service.

4. How friendly are they? Banks put a friendly face on their ads and commercials to earn your business. The problem is that some banks don’t work as hard to keep your business. If you are dissatisfied with their services they invite you to choose another institution. Banks operate in a way that satisfies their investors, and they earn a profit.

Credit unions work to keep customers happy. After all, the customers are the shareholders. Credit unions are not for profit, so any funds that do not go to operating and other financial costs are funneled back into offering lower interest rates on loans and higher yields on CDs and money market accounts.

Offering unsurpassable customer relations skills and interest rates that are just plain better, credit unions are a notable threat to banks. Banks, however, have more money supporting them and are therefore able to offer bigger and better incentives to their customers. Deciding whether to store you money at a bank or credit union involves making an informed decision that relates to your personal situation.

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Tags: Finance