When considering options for financial services such as setting up a checking account, savings account, or taking out a loan it is common practice to refer to a bank. But what about that other financial institution, the credit union? What do they do? Are they the same?
Banks and credit unions offer the same products and services, almost. However, there are some key differences to be aware of when making your decision. Let’s review the similarities and difference to decide what is best for you!
Terminology: While banks and credit unions offer virtually the same financial products you may notice that they use different names for the same financial vehicle. For example: credit unions refer to savings accounts as “share accounts”, and customers as “members”. A very minor difference.
Business Structure:
Banks are a for-profit financial company, ranging from big to small, national or local. Most of these banks are public companies, this means that ownership goes to company stock holders.
Credit Unions are not-for profit financial cooperatives and they are typically small and local. They are run by member-owners on a one member-one vote system. Essentially members agree on all of the cooperative’s decisions together. The members are typically un-paid volunteers who are elected by vote.
Eligibility
Banks can conduct business with any customer.
Credit Union membership is restricted to certain people with affiliations. For example: where they live, work, attend school, etc. Other affiliations may apply. However, under the Federal Credit Union Act, once you are a member you are a member for life, even if you leave the affiliate group.
Fees, Incentives, and Rates
Banks typically charge more. Banks commonly pay their customers lower earnings on deposit accounts and charge higher rates on loans, but of course this is not always the case! However, they typically offer better rewards on credit cards.
Credit Unions are typically associated with lower fees (overdraft fees, ATM fees etc.), and membership requires a small deposit of $5, and most do not require minimum daily balance. Additionally, they may offer higher rates of return on savings accounts, money market accounts, and CDs.
When deciding what financial institution to work with remember these considerations, and check out your local branches! For more information on banks, credit unions, and other financial services visit Powercat Financial located on the 3rd floor in the Union. To request an appointment with one of our peer financial counselors follow this link: http://www.k-state.edu/powercatfinancial/ .
Emily Koochel
Peer Financial Counselor
