By David A. L’Ecuyer
Many people get confused or simply don’t appreciate the difference between banks and credit unions. Both banks and credit unions offer many of the same services. These financial services include auto loans, home equity loans, personal checking accounts, business checking accounts, personal savings accounts, CDs, debit cards, Visa Credit Cards, safe deposit boxes and much more.
The fundamental difference between a bank and a credit union is how they run their respective operations as it relates to their mission statement. One critical difference between these two organizations starts with your initial deposit. The money that is deposited in a credit union makes you a share holder or owner. Your initial deposit at a bank makes you a customer while ownership of the bank is reserved for shareholders or stockholders.
A bank is run for profit by a management team that is overseen by investors. Every transaction that passes through the bank needs to create a profit for the company. This typically means you pay fees for normal banking practices to ensure that the bank makes that profit.
Credit unions are by definition “not for profit” which adds a great deal of flexibility to their operation. All profits that may be gained from the operation of a credit union are returned to the members or owners in the form of lower interest rates for loans or higher interest rates for deposits.
Banks and credit unions utilize networks to run their respective ATMs. For some banks, every transaction has a fee attached to it. Credit Unions on the other hand have created networks with sister Credit Unions that allows for their members to use their ATMs for free. These networks make ATMs available to members throughout the country and even around the world.
A noticeable difference for many new credit union members is that customer service is significantly higher at a credit union. The employees at a credit union seem to genuinely strive to exceed your expectations for service and only suggest products that meet your needs. Focused on profitability, bank employees are instructed to push certain products, even at times strong arming customers into purchasing something they may not need.
A consumer with all the facts has a simple choice to make on where to conduct their financial business. The benefits of a credit union are numerous to their members. The customers or members are actually the owners of the credit union. Credit unions are not for profit, which means that any profits earned are shared with the members in the form of low interest rate loans or higher than average deposit interest rates. In addition, credit unions have significantly fewer fees than banks on most services and products. The deposits at a credit union are insured for the same amounts as deposits of any bank. The FDIC insures banks and the NCUA insures credit unions, both agencies of the federal government. Again, a consumer with all the facts has a simple choice to make on where to conduct their financial transactions.
David A. L’Ecuyer is the president/CEO of Central One Federal Credit Union. His marketing manager, Zachary Daniels, can be reached at 508.842.7400, 8 a.m. to 4:30 p.m. or by email at firstname.lastname@example.org and at www.centralfcu.com