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Forum nameGeneral Discussion
Topic subjectFor no reason at all: Credit Unions vs. Banks
Topic URLhttp://board.okayplayer.com/okp.php?az=show_topic&forum=4&topic_id=13407755&mesg_id=13407972
13407972, For no reason at all: Credit Unions vs. Banks
Posted by MEAT, Tue Oct-13-20 07:19 AM

For-Profit vs. Nonprofit

What makes banks and credit unions different from each other is their profit status. Banks are for-profit, meaning they are either privately owned or publicly traded, while credit unions are nonprofit institutions. This for-profit vs. not-for-profit divide is the reason for the difference between the products and services each type of institution offers.

A credit union is owned by its members, since the institution is actually set up as a cooperative. Credit unions typically open membership to individuals who share a common bond, such as the industry they are employed in, the community they live in, their faith or their membership in another organization. In addition, as a nonprofit, credit unions are also generally exempt from federal taxes, and some credit unions even receive subsidies from the organizations that they are affiliated with. This means credit unions do not have to worry about making profits for shareholders.

It is the credit union’s mission to provide its members with the best terms it can afford for their financial products. This means members generally get lower rates on loans, pay fewer (and lower) fees and earn higher APYs on savings products than bank customers do.

Banks, on the other hand, are in business to make a profit. This means banks are focused on making that profit, rather than specifically centering on the needs of the account holders. This is one of the reasons why you will often find that banks charge more fees, and at a higher rate, than credit unions do. Interest rates on lending also tend to be higher at banks, while their APYs on savings products tend to be lower.