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Credit Union vs. Banks

The Credit Union Difference

Credit unions exist to help people, not make a profit. They are not-for-profit cooperatives, owned by their members who save and borrow there. In fact the credit union motto is "People Helping People". The goal of credit unions is to serve all members well and in turn, members are loyal for this reason.

Members know their credit union will be there for them in bad times, as well as good. The "People Helping People" philosophy extends to communities in which credit unions operate. Credit unions and their employees get involved in community charitable activities by donating money, time and their resources.

Credit unions assist members to become better educated consumers of financial services. Many credit unions offer free financial counseling and education programs to their members and within their local communities. Each credit union is governed by a volunteer board of directors, elected by and from the credit union's membership.

Credit unions are an economic democracy with each credit union member having equal ownership and one vote - regardless of how much money a member has on deposit. At a credit union, every account holder is both a member and an owner.

Members of credit unions benefit in a number of ways from their access to competitive products and services to the financial benefits found in lower loan interest rates and higher interest on deposits. Credit unions provide a secure financial choice for all consumers, all the while, staying true to our mission of "People Helping People".

The terms credit unions and banks are very often used interchangeably. Although both are financial institutions there are unique differences between the two.

Credit Union Membership

Chances are nearly everyone is qualified to join at least one of the 8,000 credit unions in the United States, but there are restrictions. Some may be community-based, where only people who live, work, worship or attend school in certain areas are eligible to become members.

Northeast Credit Union is community based which means if you live or work or do business in one of the 6 NH counties (Strafford, Rockingham, Hillsborough, Merrimack, Belknap, Carroll (and southern York in Maine)) or within 25 miles of one of our branches, you are eligible for membership at Northeast Credit Union.

Ownership

Credit unions are not-for-profit, member-owned financial institutions that seek to promote the financial well-being of its members through a system that is cooperative and volunteer directed.

Credit unions exist solely to serve their members and income is returned to members through offering higher interest rates on deposits and lower rates on loans.

Banks are community, regional or national for-profit business corporations owned by private investors and governed by a board of directors chosen by stockholders.

Credit unions are owned by their members. In addition to being an owner, each credit union member, regardless of how much he or she has on deposit, has an equal vote in elections. Credit unions are democracy in action.

Insurance

Many credit unions are insured by the National Credit Union Administration (NCUA). They are an independent federal agency that charters federal credit unions and supervises their activities. National Credit Union Share Insurance Fund (NCUSIF)-insured shares carry the full faith and credit of the United States government, just like Federal Deposit Insurance Corporation (FDIC)-insured deposits, and have the same insurance limits on accounts at insured institutions. The National Credit Union Association publication "Your Insured Funds" has all the details on share insurance.

Range of services

All financial institutions usually offer basic banking services (checking and savings accounts, consumer loans, etc.) with larger ones offering a fuller range of services (credit cards, mortgages, foreign currencies, etc.).

Banks emphasize business and consumer accounts, and many provide trust services. Credit unions emphasize consumer deposit and loan services.

Rates and Fees

Credit Unions

Typically membership requires a deposit of as little as $5 to open an account
On average, compared to banks, credit unions pay members higher dividend rates on share deposit accounts and offer loans at lower interest rates
Earnings from credit unions are given to members in the form of higher deposit rates and lower loan rates
Credit Unions offer attractive pricing that puts pressure on the other financial institutions to offer more attractive rates, although in may cases not as low as a credit union. Without credit unions, bank customers would most likely pay more for their financial services

Banks

Compared to credit unions, banks generally pay the customer lower interest rates on deposit accounts and offer loans at higher interest rates
Earnings from a bank are given to stockholders as profit sharing

Comparing Credit Unions and Banks

*Credit Unions*	*Banks*
Structure Credit unions have members, not customers. Everyone with an account has a share of ownership in the credit union. Therefore, you are actually an owner of your credit union and not just another account number.	Structure Banks have owners, usually a group of investors. Banks exist to make a profit for their owners.
Leadership Credit unions are democracies. They are run by a volunteer board of directors elected from the membership. Every member has a vote in how their credit union is operated.	Leadership Banks are run by their investors, who have the sole voice in how things are done.
Earnings and Profits Credit unions are not-for-profit organizations. After expenses are paid and reserves set aside, all money surpluses are returned to the members in the form of higher dividends and lower loan interest rates.	Earnings and Profits At banks, generally only investors see a share of the profits.
Account Holders Credit unions serve only certain groups of members, like those working for a particular employer or living in the same neighborhood. This specialization allows credit unions to focus on the needs of a certain special group of people.	Account Holders Anyone may open an account at any bank. Customers sometimes become lost in the shuffle or "just another number."

Credit unions have definitely kept up with the times! Many credit unions offer the same high-tech services as your local banks, like home banking, online bill pay, online check images and online loan applications. Even better, credit unions generally charge much lower fees for these awesome services than do banks.