Serious question. I’m currently with a bank and have heard CU’s are better. Is there any difference?
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A bank is a big for profit business.
A CU is pretty much a bank that is owned by it’s customers. To get a loan you have to buy an equal share of the union. So the profits aren’t made by a few rich shareholders but rather by everyone equally.
CUs *tend* to focus on giving good conditions to their customers instead of focusing on profit. (At least that’s the original idea. But If you are a customer you are also an owner, so if they focus on profit you get a share of that)
The issue is that CUs often have limits in how much money they can provide. So for a housing loan you might have to take another loan on top.
To use a credit union, you have to be a member. Some credit unions only allow certain types of people to members – like teachers, or employees of a certain large company (and their families); others allow anyone to join. Members of a credit union are also partial owners of the credit union and they get a share of the profits at the end of the year.
Banks are owned by a person, family, or a company, depending on their size and history. They allow anyone to use them. The owners are the ones who get all the profits from the bank.
So the basic difference is that banks are in business to make a profit for the owners while credit unions are in business to make a profit for all the members.
The biggest difference is that CU’s are exempt from income taxes.
In theory they were set up as cooperatives to serve limited groups of people.
In practice they now serve everyone they can just like a bank.
They supposedly redistribute earning back to “members” (anyone that does business with them) through better rates but in reality they’re pricing more or less like everyone else is – based on what the market will bear given the circumstances.
There are supposed to be some limitations on what kind of loans they can do but those keep expanding.
Ultimately they’ve become banks with a tax loophole that benefits you very little.
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