Dear Ash Cash: What’s the difference between a bank and a credit union? –Stacey Jenkins
Ash’Cash: With the introduction of this great recession and many people’s disdain for “The 1%”, the question of big bank vs. credit union often comes up. While banks and credit unions look and act very similar from the outside, their internal structure makes them two completely different animals. They both offer checking and savings accounts, CDs, loans, and most of the other products and services we expect from a financial institution, but the main difference is that a bank is a for profit business, and a credit union is a not-for-profit business.
Understand that not-for-profit and non-profit are two different terms. Not-for-profit means that the company operates like any other business and makes a profit, but the profits are not for investors but are for the growth and continuation of the business. A non-profit is a charity and relies heavily on donations and grants to continue their operations and is tax exempt based on its 501(3)c status. Credit unions are owned by its depositors, or “members” as they are referred to, and the money you put into a credit union is a share appose to a deposit. In essence when you bank with a credit union, you own a percentage or share of the institution.
A bank is a for profit business so it is in the business of making money. Banks, because of their popularity, reach, and financial stability, are more convenient and are up to date with technology, but a credit union still existS for your benefit. Ultimately, there isn’t one better than the other; it all depends on your preference of convenience vs. best interest. If you want convenience, then the big banks are your poison. If you want an institution that is looking out for your best interest, including higher rates on deposit accounts and lower rates on loans, then a credit union is best for you.
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Ash’Cash is a Business Consultant, Motivational Speaker, Financial Expert and the author of Mind Right, Money Right: 10 Laws of Financial Freedom. For more information, please visit his website, www.IamAshCash.com.