Many different people ask what is the difference between a credit union and the bank. Not a lot of difference but this article should straighten out any questions you may have regarding the difference between your local credit union and your local banks.
A credit union is a nonprofit financial cooperative that makes personal loans and offers other consumer-based banking services to people sharing a common touch, usually employment at the same company or institution. Deregulation in the banking industry since the 1970s has enabled credit unions to provide many of the identical banking services as the big traditional banks, savings banks, and savings-and-loan institutions.
Federally chartered credit unions can write residential mortgages and issued credit cards. Many credit unions also offer interest-bearing transaction accounts. Credit unions can charge below-market rates on lending instruments while paying higher rates of return to savers with savings accounts, as they are exempt from federal and state taxes. This is a very important factor when it comes to credit unions.
In 1983, membership eligibility was greatly relaxed, allowing credit unions to solicit accounts from a member’s immediate family, significantly expanding potential membership in credit unions. Credit unions get their operating funds from shares purchased by individual owners, who are called members, and pay dividends out of their earnings.
The national credit Union administration, an independent federally funded agency chartered in 1970, is the primary regulator of the national credit unions. It also operates the national credit Union share insurance fund, which offers share insurance up to $100,000 per account for qualifying federal and state credit unions, and the central liquidity facility, a lender of last resort for credit unions.
I hope this clears up some of your questions regarding the difference between a credit union and the typical bank.
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