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Pensacola Area: 850.479.9601    Tallahassee Area: 850.562.6702

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A Credit Union is not a Small Bank

Posted on Wednesday, May 29, 2013

From outside appearances, a credit union may be seem to be nothing more than a small bank. After all, a credit union offers checking and savings accounts, loans, and investment accounts, just like a bank. But even if a credit union feels like a bank to members, it's much different, down to its very core. Let's look at some of the ways credit unions differ from banks.

Member Ownership and Management
Banks are owned and managed by shareholders. They're businesses, and their goal is to make a profit. On the other hand, credit unions are cooperative financial institutions that are owned and operated like banks. Because credit unions are owned and operated by their members, they can meet the unique needs of their community, unlike large, coast-to-coast corporate banks.

Dividends
Credit unions operate by using the pooled savings of their members. These funds are used to provide loans at low rates to members. Because individual members are essentially lending their savings to the credit union for loans, they may receive dividends. Most banks don't offer dividends in any form to their customers.

Board of Directors
Banks are run by stockholders whose main responsibility is to ensure a return in their investments, where credit unions are run by a board of directors. When a credit union earns money, the board of director reinvests the profits or redistributes the profits among the members. This is what allows credit unions to offer lower interest rates on loans: the members benefit from the credit union's success.

These attributes are what make credit unions unique, but there's something important that banks and credit unions have in common: backing by the U.S. government. The FDIC backs individual accounts up to $100,000 at traditional banks, and members of credit unions enjoy insurance of up to $100,000 through the National Credit Union Share Insurance Fund (NCUSIF), so credit union members have the same peace of mind regarding the safety of their deposits.

Clearly, credit unions are not just small banks. They offer member ownership and management, dividends, and a board of directors, all which provide superior banking experiences for their members. Because credit unions are not-for-profit institutions, they can offer their members more, and that's just what we do at Gulf Winds Federal Credit Union. Come on in to one of our branch locations to see what we can do for you.

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