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Diversities Between a Bank and Credit Union by Cleo Gib
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Diversities Between a Bank and Credit Union |
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Finance & Investment
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Many people use terms like bank and credit union similarly. However, the reality is that these two institutions are entirely different from one another. The only real commonality that they share is that they hold money for their users. There are some very big differences between banks and credit unions. Banks are owned by private investors. They are run by a board of directors who are all chosen by the major stockholders. They are for-profit enterprises, which means that they aim to make money off of all of the money that bank users contribute. Because banks are for-profit, they have access to much more capital than credit unions. They are able to invest more money in more lucrative stocks, which provides them with more money to loan out to bank users. Big companies tend to do business with banks because they can access more money for loans and investments. Banks also give out more loans in general simply because they have the ability to do so. However, a bank in Lima Ohio will require higher interest rates on loans and credit cards simply because they are for-profit. Credit unions are non-profit organizations that are owned and operated by members of the bank. Decisions are made by a board of directions that are all voted in by members of the credit union. Credit unions do not have access to as much capital as banks, making them good only for small short-term loans. However, interest rates at credit unions are typically much lower and penalties much smaller because they are non-profit organizations.
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