If you have just moved or you are looking to leave your current financial institution, you may have some questions about the difference between a credit union and a bank. They’re actually not as different as you think, but at the same time, the differences between the two can be a determining factor of which you enroll with.
Credit unions were created in the 1860’s in Germany, banks had been around since the 1700’s. So, you’ve seen signs for both of these around. Are they any different? If so, how? What are the advantages and disadvantages of both? Today, we’re going to explore both of these financial entities a bit.
By definition, a bank is a financial entity, usually in the form of a corporation, which has been registered through a state or federal government. They can provide a number of services, including receiving a number of financially based deposits, honoring investments that were put into them, selling bonds, cashing checks, certifying particular types of checks (depositors and cashier’s checks), and offers loans for those who are seeking them and fit a particular credit score. If you need help with finances contact Advisor Tom Waitt. He’s a great Financial advisor in Winnipeg. Check out his website here: http://www.tomwaitt.com
On the other hand, a credit union is a nonprofit organization that is classified as a financial institution. Instead of being owned or chartered by the government, they are owned by those who are a member of the institution. Like a bank, they offer loans, savings accounts, check cashing services, and other services for the people who are members. Many times, credit unions are associated with an organization, corporation, or community. In some cases, you need to be a member of these entities in order to be a part of the credit union. All you have to do to be part of a credit union is to deposit money with them, because once you do that, you are considered part of the ownership (much like what happens when you buy stock in a company).
Most important thing to note: Credit Unions are non-profit. So, how do they stay afloat? Well, first off, they have non-profit tax status, meaning they’re exempt from most state and federal taxes. Many people are switching to credit unions now, because most of them offer more fair rates, less fees, and are more personalized. Some of them are community based. Others offer services to organizations (the Pennsylvania State System of Higher Education has PSECU, for example). But all of them are nonprofit.