Why choose a Credit Union?
For some people, financial institutions can seem pretty similar at first. Although Credit Unions offer many of the same products and services as other financial organisations, that's where the similarity ends. There are some important differences that set Credit Unions apart and benefit their members.
Credit Unions V Banks
What is the Difference?
- Depositors in a Credit Union are called members.
- Each member holds an equal share of ownership in the credit union regardless of the size of their accounts.
- Credit Unions can only serve their members - eligibility to join is determined by the Credit Union's common bond.
- Banks can serve anyone from the general public however their customers have no ownership in the institution.
- Banks are owned by investors who may or may not be depositors.
- Credit Unions are not-for-profit organisations. They are in business primarily to serve their members.
- Any surplus funds are returned to the members in the form of dividends on savings, competitive rates on loans and new and improved services.
- Banks are for-profit organisations, which mean that their main purpose is to generate profits for their investors/shareholders.
- In Banks, only the investors (shareholders) get a share of the profits.
- Credit Unions are democratically controlled. The Board is made up of volunteers who are elected by and from the membership.
- Each member, regardless of how much money they have in the Credit Union has one vote.
- At Banks, only the investors (shareholders) have voting privileges. Customers don't have voting rights, cannot be elected to the Board and have no say, whatsoever in how their bank is run.
- Bank directors are paid. They may not be from the same community the bank serves and may not even use the bank's services.
- Credit Unions return earnings to members through higher savings rates and lower loan rates. Credit Unions also keep any fees or charges to a minimum.
- Banks are profit-driven and distribute that profit among the bank's shareholders. These shareholders may or may not be customers of the bank.
- Credit Unions are owned and funded by their members, and so don't raise funds on the wholesale money markets.
- In some ways, Credit Unions are a safer investment in that our investment potential is limited to a very narrow range of investments, mainly the members, high street bank accounts and government securities.
- Banks and Building Societies have the ability to invest their funds in a wider range of investments, some of which might be higher risk and some of them might raise ethical questions such as alcohol, armaments, tobacco, child labour etc.