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Credit Unions |
Banks |
| Account Holders |
Account holders are called “members.” Each member is part owner of the credit union. Credit unions are also required to serve a defined Field of Membership, based on a common bond of employment, association or community. Bylaws further define for each credit union the common bond requirements it must meet. Credit unions may serve only the members who fit these parameters. |
Banks can serve anyone in the general public, but their account holders have no ownership interest in the institution. Banks are owned by investors who may or may not be account holders. |
Structure |
Credit unions are not-for-profit – in business primarily to serve their members. If a credit union has excess earnings after reserve requirements are met, those earnings are used to offer the members lower interest on loans or higher interest on savings, to offset costs so as to limit the need for fees, or to develop new products and services for the membership. Excess funds can also be paid back to members as a dividend. |
Banks are for-profit, meaning their primary purpose is to generate profits for their stockholders. In banks, only the stockholders – not account holders – get a share of the profits. |
| Governance |
Credit unions are democratically controlled, meaning each member has a say in how the institution is operated. Credit union directors are volunteers elected by and from the membership. Each member, regardless of how much money they have on deposit, has one vote in electing board members. Members can also run for election to the board. |
At banks, only stockholders have voting privileges. Account holders don't have voting rights, cannot be elected to the board, and have no say whatsoever in how their bank is operated. Bank directors are paid, though they may not be from the same community the bank is in and may not even use the bank’s services. |
| Insurance |
Credit union accounts are insured up to at least $250,000, or more for a combination of accounts, by the National Credit Union Share Insurance Fund (NCUSIF). The fund is managed by the National Credit Union Administration, an agency of the federal government. |
Banks' accounts are also insured to at least $250,000. Their insurance fund is called the Federal Deposit Insurance Corp., also an agency of the federal government. |
