What is a Credit Union and How is it Different From a Bank?
Conventional Banks v/s Credit unionsCredit unions are different than traditional banks and financial institutions. The major difference lies in the fact that other banks and financial institutions are for-profit organizations that operate for the benefit of shareholders, while credit unions split profits among their members through dividends. Another difference involves ownership and control. Banks are owned and controlled by stockholders whose main interest is to obtain a return on their investment. Credit unions are run by members through a board of directors who reinvest the profits made, or provide members with a portion of the profit. Since the very existence of credit unions is for the welfare of its members, all profits can be reinvested, allowing the credit unions to provide lower interest rates on loans.
Are you eligible for credit union membership?Certain regulations restrict membership in a credit union to a certain demographic group: for instance, a particular credit union may cater to people working for the military. Once you join, the union usually allows you to remain a member even if you no longer qualify for that membership (you moved, changed jobs, etc.).
If you are interested in joining a credit union:
- Get in touch with your state credit union league and talk to a representative who can inform you about local credit unions.
- Talk to your boss to find out if your company has sponsored a credit union or any SEG (select employee group) that is affiliated to a credit union.
- If a family member’s employer sponsors a credit union you could become eligible for its membership, as credit unions usually allow membership to a member’s family as well. Credit unions may have a different definition of “family”, so check out if a particular credit union allows only immediate family members.
- Ask around about credit unions that are based on certain communities.