Credit Unions: What Do They Entail?

Posted by Rebekkah On March - 22 - 2012 0 Comment

Stacks of HundosAll together, there are a total of sixteen different types of banks internationally. The most common ones we use and hear about are commercial banks, community banks and credit unions. Let’s explore credit unions and what they entail. Basically, a credit union is a financial cooperative owned by its members. It is controlled by a democratic party. The purpose of credit unions is to provide promotion of thrift, credit at competitive rates and various other financial services. It is common for credit unions to also offer services which benefit the development of the community. Therefore, credit unions can also be called community development financial institutions.

So, what’s the difference between credit unions and other types of banks? The main difference lies within the fact that the members who have accounts at the credit union are its owners directly. Their members are elected in a democratic one-person-one-vote system. The amount of money invested in the credit union does not affect the voting system. In general, credit union members view themselves as more morally correct that other types of banks due to the fact that they often play a part in building and developing their local community. According to surveys, members of a credit union show greater rates of satisfaction in the services provided than do customers at other variations of banks. Factors such as interest rates are controlled by a Board of Directors consisting of volunteer members of that particular credit union. Credit unions offer many of the services that other banks provide, but they typically have alternate terms for these services. For example, savings accounts are referred to as share accounts, checking accounts are called share draft accounts and certificates of deposit are usually called share term certificates. Another key difference between credit unions and other types of banks is that typically, only members of a credit union can deposit or borrow money from that credit union. Outsiders must become members to take advantage of their services.

Credit Unions strive to ultimately offer a wide range of services at inexpensive rates when compared to those of other banks. Lastly, credit unions are significantly different from other financial establishments because they aim to serve their members rather than gain large profits. This is referred to as “not-for-profit”. There are ten diverse nations around the world who operate credit unions and they each contain millions of members. Now that you’ve got some inside information, you may feel inclined to check out credit unions for yourself. If you decide against it, you’ve still got fifteen other types of banks to choose from (of course, depending on your location).

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