by Roger Kraemer

Created on: August 04, 2008   Last Updated: August 11, 2009

Just The Facts Banks vs. Credit Unions

I admit, many of my clients are Credit Unions. As a result, I've become a believer in the Credit Union mission. But in light of that you may be skeptical about getting unbiased information. So let's deal only in facts:

Fact 1: Credit Unions are owned by their members

The benefit to you: Higher rates on deposits, lower rates on loans, lower fees, better service

Why? Banks are owned by shareholders, or in some cases private individuals or families. Their goal is to make money for their owners, not to look out for their customers - most of whom are not shareholders. By contrast, every Credit Union member is an owner, and the Credit Union's goal is to take care of the best interests of its owners. How do Credit Unions do that? See Fact 2.

Fact 2: Credit Unions are non-profit organizations

The benefit to you: Lower costs and greater satisfaction than with traditional banks

Why? Banks strive to maximize profits to benefit only their shareholders. As a non-profit organization, the earnings of the Credit Union must be distributed back to all our member/owners. As a result, we charge lower rates on loans, pay higher rates on savings, and assess lower fees. In fact, Credit Union members saved $10.9 billion in 2007 by using Credit Unions instead of banks.

(Source: MSN Money, Ditch your Bank for a Credit Union, July 2007; CUNA, America's Credit Unions: Secure, Strong; July 2008)

Fact 3: Credit Unions are safer than banks

The benefit to you: A sense of security, knowing that your financial future is protected

Why? Since Credit Unions are not driven to make huge returns for a minority of our constituents, we are much less likely to make the kind of risky investments that have hurt banks recently. And, not only have banks made risky loans that Credit Unions generally won't make, but frequently the investment divisions of major banks purchase mortgage-backed securities a strategy which, in today's market, has cost them billions. But wait, weren't we sticking only to the facts? Well, we are. The fact is that Credit Union capital-to-asset ratio as a whole is stronger than that of banks as a whole, and Credit Unions, by nature are managed more conservatively than banks.

(Source: CUNA, America's Credit Unions: Secure, Strong; July 2008)

Fact 4: Credit Union deposits are insured, just like bank deposits

The benefit to you: Protection against loss under almost any circumstances

Why? Deposits in a Credit Union are insured

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