shantomo.com

Jun 10, 2007

Credit Union vs. Banks

Apologies for the rather lengthy hiatus. I was busy with the full-time job that is not very much liked by anyone - job hunting. I have just recently completed my first week of work with the Credit Union Central of BC (CUCBC). Financial industry is the last place I imagine to find in. Though, after having listened to one of the workshop speakers at Backpack to Briefcase conference earlier this year (2007), I am no longer surprised stumbling into this field, as the speaker said that nowdays, most professionals have more than one career; in fact, generally most have 4-5 throughout their lifetime. Having said that, in the beginning, I thought that I had gone into the private sector, when in fact, Credit Unions still fall under the non-profit sector. The question that I asked myself and inevitably will be asked by others as well is the difference between banks and credit unions.

Banks and credit unions do offer very similar financial services, but here’s what makes them different…

	Credit Unions (CU)	Banks
Depositors	Depositors are called "members" and each member is a part owner of a credit union. Credit union may only serve their members (egibility to join is determined by the CU's bylaws)	Banks can serve anyone in general public but their customers have no ownership interest in the institution. Banks are owned by investors who may or may not be depositors.
Structure	Are non-profit cooperatives, organized to provide financial services for its Members. Profits are shared by Members through higher savings rates, lower loan rates, and low or no fee services.	Are organized to earn a profit off its customers for its stockholders. Profits are returned to the stockholders.
Governance	Every Member has an equal vote in their Credit Union. The Board of Directors are unpaid volunteers, elected by you, the Members.	Banks are run by the stockholders. The Board of Directors are paid, and elected by stockholders.
Insurance	Credit union accounts are insured to $100,000 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 $100,000. Their insurance fund is called the Federal Deposit Insurance Corp., also an agency of the federal government.
ATMs	Shared network of CU ATMs i.e. if you are a member of CU A and withdraw cash at a CU B, you won't get dinged (no service charges).	Depending upon its own network of ATMs i.e. if you are banking with bank C and withdraw money with bank D, then a service charge may apply to your transaction.

sources: The League site, First Financial, BECU, and WDFI

So, how does this link to sustainability, you wonder. Today, sustainability have become a buzzword that is often equated with our physical environmental-related issues such as climate change. In order to have a sustainable community, there are other capitals aside from our natural capital - social, cultural, physical, human and economic capitals. What is this economic capital? Among the different focuses, it means developing community financial institutions. Ergo, opting to save your money with a Credit Union helps to make your community stronger and sustainable.

CUs membership are based on a common bond e.g. working for the same employer, belonging to a same church or living in a same community. If you need more reasons to switch, you can find it here. When you are ready to join a credit union and you happen to reside in BC, Canada, you can find a credit union here.