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Credit Unions Vs Banks: What is the Difference?

What is the difference between a credit union and a bank? We in the credit union movement get that question all the time. The truth is, not much, at least on the surface. We appear to be very similar. Both offer savings products, loan products, checking accounts, etc. We both deliver those services through various channels such as a branch network, mobile network, auto dealership networks, ATM’s and such. Banks typically are larger with more branches and more customers. Banks have more experience in business services such as business lending than credit unions do, however credit unions are making inroads to those types of services. Both industries are highly regulated by state and federal agencies. Deposit insurance is required of both.  So, it’s understandable why the public gets confused on the difference. I submit that one reason we are so similar is that the public demands it. In other words, the public demands the same products and services from both. The public demands the same convenience factor from both, the same availability and on & on. It’s amazing that we’re not more similar, if that’s possible.


The real difference between credit unions and banks is not apparent until we get past the products, services, convenience and delivery channels and get to the structure of the two organizations. Banks are for profit organizations who are accountable to both their investors (stock- holders) and customers. Customers are a means to an end. Customers generate profit for the organization a portion of which is passed on to the stockholders who may or may not be customers of the bank. Credit unions on the other hand are not for profit financial cooperatives. The only investors credit unions have are their   customers who are designated as members and owners of the cooperative. The investor (member) and the customer are one in the same.  Since they are both the same there is no conflict about who has priority over service. The member always wins.  


River Valley Credit Union, like all other credit unions, is a financial cooperative. That means we are owned by our members. Our sole purpose for existing is to serve the financial needs of our member/owners.  Credit unions offer the same types of products and services that banks do but for different reasons. Banks maximize profits from their customers to satisfy investors. Credit unions make a profit to pay the bills, increase capital to remain safe and sound, invest in products and services to meet the needs of our member/owners and pay dividends to member/owners. Credit unions, for the most part, remain local and reinvest in the local economy. Credit unions own roughly 7% of the financial services market. The banking industry owns the rest, yet studies show those communities with a credit union presence, cause banking customers to get better pricing on products and services simply because credit unions were in the market. Credit unions truly do provide financial services alternatives to banks and gives the general public more choices in their selection of providers. 


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