Are Credit Unions and Banks the same?
Credit Unions and Banks are similar because both offer a broad range of financial products including checking and savings accounts, CDs and loan products such as mortgages and credit cards. The main difference between a Credit Union and a Bank is how they are owned and operated. Credit Unions are cooperatives, owned and operated by their members as a not-for-profit institution. Banks are owned by investors and stockholders and are definitely for-profit corporations.
Because Credit Unions are not-for-profit, earnings are paid back to members in a number of ways including higher savings rates and lower loan rates. Banks earnings are paid to their stockholders (only) through dividends.
Membership and Account Opening
To join a Credit Union, the potential member must meet the membership requirements of the Credit Union, the requirements vary depending on the CU’s objective. Membership eligibility can be based on geographical location (members must live and/ or worship within a certain area), or, on the potential members’ employer such as the Pentagon Federal Credit Union, which specializes in servicing members of the military and their families. If membership requirements are met an application is filled out and submitted. The majority of Credit Unions offer both online and in-branch applications and require a minimum of a $5.00 deposit to become a member.
To open an account with a Bank a minimum deposit and identification are needed. Typically, there are no membership requirements.
The minimum opening deposit ranges between $25.00 and $100.00. Most Banks offer online and in-branch applications.
Banks and Credit Unions offer deposit insurance, this protects depositors from losses due to institutional insolvency.
The National Credit Union Administration, or NCUA, is an independent federal agency that was created to regulate, charter and supervise federal credit unions. The NCUA operates and manages the National Credit Union Share Insurance Fund which insures the deposits of account holders in federal credit unions and the majority of state-chartered credit unions.
Banks and Credit Unions offer the same services, and protections for deposit products.