subject: Credit Unions - A Different Way To Bank [print this page] There are a number of reasons why someone would choose to consider their local credit unions rather than take their money to one of the traditional banks. One of the main reasons is the personal service that often goes hand in hand with these establishments. Banks are created to make money, while CUs are non-profit in nature and pass on the earnings they accumulate to their members in one way or another. This may include reducing fees or it may be more evident, such as providing a dividend at the end of the year for those who hold an account. Here's a look at these very different kinds of financial institutions.
A Unique Spin
Credit unions are set apart from traditional banks primarily because they operate on a cooperative basis towards an end that is non-profit in nature. The organizations are owned by the members themselves. When you open an account with one of these institutions, you are essentially buying into the cooperative. The money you put into your account is then available for loans by other members. While this can't be said for every example of such an institution, most of them will offer their members far lower interest rates on loans and lower fees for their accounts.
Organization
A traditional bank is usually overseen by a board of directors that is paid to handle the day-to-day business of the company and make decisions as to its future. In contrast, elected volunteers are usually at the head of many credit unions. Often, outside funds and promotion will come in the form of sponsorships from the employees, area churches and schools, and some of the larger businesses. This isn't always the case, however. Some are self-supported and open to the public at large and anyone who wants to open an account may do so. Others restrict their memberships to employees of a certain company and so forth.
Charters
Credit unions are sometimes -- but not always -- federally insured by either the FDIC or the NCUSIF. In either case, your money is safe up to a certain dollar amount. If a financial institution you are joining has no such insurance, you may want to think twice about your investment. Federal credit unions get their charter from the NCUA, which has a set of rules that any member institution must adhere to in order to be a member of the charter. If you are opening an account, do some research to make sure your money will be well handled.
