Difference Between Bank and Credit Union
Bank vs Credit Union
Banks and credit unions are more similar than they are different. Banks as well as credit unions are financial institutions which provide a variety of services to their depositors like home loans, saving accounts, etc.
The key philosophy behind credit unions and banks is different. The banks operate for the aim of generating profits while credit unions are community-based institutions which run as non-profit. The concepts of banks are very old whereas the credit union history dates back to the 19th century. Initially, credit unions were established as worker’s cooperatives to help them to solve their financial problems.
In a credit union, if you want to be a depositor, then you need to have a membership first. In applying for a membership, you need to have a simple account with minimum deposits. Each member becomes a part owner in the credit union and is entitled to receive shares based upon his contributions. Thus, people having large amounts of funds get a higher number of shares and can receive a larger share of the profits.
The Board of Directors of a credit union are comprised of volunteers or elected members who participate in major financial decisions and elections; whereas a bank is owned by a private company. The bank’s Board of Directors is appointed by the company or shareholders. Depositors receive some amount of interest on certain types of accounts.
Credit unions encourage people to save, promote thrift, and also encourage them to use money wisely. Banks, on the other hand, are least interested in all the above-mentioned issues.
Credit unions are more personalized and friendly in service, and their strength lies in connecting with the community. Banks are standardized to a high degree, and their focus is on professional services with consistency not essentially customizing the services according to their clients.
Credit unions usually finance small projects related to community development and try to keep money within the community. Banks, on the other hand, tend to finance large and mighty projects. The interest rate charged by banks is a bit higher than what credit unions charge.
A credit union’s area of work is not as large as a bank’s. Banks are usually based locally and have multiple branches across a large region.
All of these facts must have helped you to reach a better conclusion!!!
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