Credit Unions Vs Banks: What’s The Difference?

With increasing uncertainty regarding regulations of banks, credit unions have emerged as a popular alternative to help people manage their financial needs. But, what is it about credit unions that sets them apart and makes them different from the traditional banks?

Business Structure

Banks are for-profit financial institutions that can be large or small, and operate on either a national or local level. Mostly, banks are public companies and are led by paid board members. However, these board members aren’t necessarily the depositors themselves.
Because of their public status, the bank’s shareholders are the ultimate owners and are the ones who buy company stock as a form of investment. For their investments, they also expect a financial return.
Credit unions, on the other hand, are not-for-profit financial cooperatives and are usually small and local. In this business structure, members agree on all of the credit union’s decisions and work together to oversee business. Unlike as it is in a bank, most credit union directors are unpaid volunteers who are elected by the members through their votes.
Profits can be distributed in two ways to the members; they can either earn interest (also referred to as dividends by some credit unions) on their deposit accounts, or they may be provided a dividend check by the credit union after a set period of time.

Fees & Interest Rates

There is a considerable difference in the rates charged by the two financial institutions. Banks generally impose a greater number of and more expensive fees than credit unions do. Furthermore, banks also usually pay their customers lower interest earnings on their deposit accounts while charging higher interest rates on loans as compared to credit unions.
Credit Unions have lower nonsufficient funds (NSF) fees and ATM fees. They also have fewer fees than banks do which can be up to 30 different types. The Banking Landscape Report by WalletHub in July 2018 also saw that credit unions offer higher return rates on savings accounts than banks.

Tax Structure

Since they are for-profit institutions, banks are subject to both state and federal income taxes applicable on corporate profits. This is either implemented directly or through the taxes paid by shareholders.

In contrast, credit unions do not pay state or federal income taxes. This is an added advantage that allows them to offer more favorable interest rates and charge lower and fewer fees to the members.
That said, credit unions are accountable to the sales or property taxes that is applicable on every business and they do pay those taxes.
Check out credit union loan rates at Tyndall Federal Credit Union in Panama City, Florida and sign up for your own account right now!

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