To the typical person, most financial institutions seem pretty much alike at first. Although, it’s true that credit unions offer many of the same financial products and services as other institutions, but that is where the similarity ends. There are some important differences that set credit unions apart and benefit credit union members across Nebraska and throughout the world.
|Credit Unions vs. Banks
What’s the Difference?
|Depositors||Depositors are called “members.” Each member holds an equal share of ownership in the credit union regardless of the size of their accounts. Credit unions may only serve their members (eligibility to join is determined by a credit union’s state of federal charter).||Banks can serve anyone in the general public, but their customers have no ownership interest in the institution. Banks are owned by investors who may or may not be depositors.|
|Structure||Credit unions are not-for-profit, meaning they are in business primarily to serve their members. Any excess earnings after reserve requirements are met are used to offer interest on savings, or to develop new products and services for the membership. Excess funds can also be paid back to members in the form of a dividend.||Banks are for-profit, meaning their primary purpose is to generate profits for their investors/stockholders. In banks, only the investors (stockholders) get a share of the profits.|
|Governance||Credit unions are democratically controlled, meaning credit unions’ boards are unpaid volunteers elected by and from the membership. Each member, regardless of how much money they have on deposit, has one vote in electing board members. Members can also run for election to the board. Statewide over 2,000 people volunteer to serve on credit union boards and committees.||At banks, only the investors or stockholders 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 operated. Bank directors are paid, though they may not be from the same community the bank is in and may not even use the bank’s services.|
|Earnings||Credit unions return earnings to members through higher savings rates and lower loan rates, as well as, by assessing fewer and lower fees.||Banks are profit-driven and distribute that profit among the bank’s shareholders. These shareholders may or may not be customers of the bank.|