If you’re reading this, you may be a member of Delta Community Credit Union. Do you know what being a member means? Are you aware that being a member is not the same as being a customer? Do you also get financial services from a local, regional, or national bank? Do you know the differences between a credit union and a bank, and how they are not the same type of financial institution?
Sure, they both offer some of the same services, but how banks and credit unions are set up as companies and operate are dissimilar. The differences between a bank and a credit union can be significant, and for anyone deciding between becoming a credit union member or a bank customer, it’s worth taking a little time to research both types of financial institutions to help decide which may better meet your financial needs.
So, what are a few of the important differences and similarities between a credit union and a bank? Well, let’s see:
Some of the ways credit unions and banks are alike and differ
- As part of its legal structure (and unlike most banks), a credit union is often a not-for-profit that works to benefit its members and not investors.Unlike banks, credit unions do not issue stock shares or pay dividends to outside stockholders who may be able to influence some of the bank’s activities. As anot-for-profitcooperative, credit unions’ focus is to help their members be more successful financially rather than to generate a profit. Delta Community’s annual earnings are returned to members in the form of lower rates, higher interest on deposits, lower fees and investments in our community. Also, credit unionsare tax-exempt, which translates to higher returns for their members since profits are not used to pay taxes.
It’s important to understand that credit unions are notnonprofit organizations, since they must make some net income to stay solvent and also build up essential capital asset reserves for financial security and to help fund operations. For a credit union, the status of a not-for-profit instead refers to how they operate in distributing their earnings to members.
- Delta Community has a voluntary Board of Directors, another difference from a for-profit bank, where Board members are often elected by shareholders. Delta Community’s Board of Directors is elected by our members.
- As a cooperative, a credit union has members, and its members are part owners of the credit union.When someone joins a credit union, then they become amember and part owner, not just a customer or client. Credit union members benefit from financial features mentioned below and often (but not always) also receive:
- Voting rights: Members typically have one vote in matters of governance, such as electing the Board of Directors.
- Dividends: Because credit unions are not-for-profit organizations, any profits they earn may be returned to their members in the form of lower rates, higher interest on deposits, lower fees and investments in our community.
- Credit unions will often offer lower rates for services, higher interest returns, and lower fees than banks. Many people choose credit unions over banks for their financial services because credit unions generally offer competitive interest rates. The more members who deposit money into a credit union, the higher the returns to the existing members. Since credit unions are not solely focused on making a profit, they don’t charge the high fees and finance charges of traditional banks, while offering a number of similar services.
- A credit union strives to offer more personal, supportive service to its members. Part of the corporate culture of credit unions is devoted personal service to their members, a passionate dedication to assisting them in meeting their needs and becoming financially successful. The vision of Delta Community is to be metro Atlanta’s preferred place to bank, known for providing its members withhonest value, superior service and trusted advice. Credit union employees always try to make extra efforts to help members, such as staying after standard branch office hours working with a member to meet a tight loan application deadline, or dedicating much of a day to assist a member in resolving an account issue. At Delta Community Credit Union, our valued members are people, not just numbers.
- While there may be few restrictions on who can open an account with a bank, credit unions may have membership requirements to join. These requirements may include specific locales of residence or employment and will generally be stated under a credit union’smembership eligibilityrequirements. More specifically, members of a credit union share a common bond, also known as the “field of membership” and there are qualifications for membership. Specific to each credit union, consumers may join based on the following affiliations and conditions:
- Employer– Many employers sponsor their credit unions.
- Family– Most credit unions allow members’ families to join.
- Geographic location– Many credit unions serve anyone who lives, works, worships, volunteers or attends a school, church or organization in a particular geographic area.
- Membership in a group– Membership in some specific group, such as a place of worship, school, labor union or homeowners’ association, may qualify you to join the credit union.
- Individuals may also join if they have a family member who meets one of the credit union’s fields of membership requirements. Others allow membership through donations to a designated charity such as the United Way®.
- Often, membership only requires a minimal deposit into a savings account, which provides access to the institution’s full offering of products and services.
- Once you’re a credit union member, you can always be a member—even if you leave the employer or leave the state. As long as your membership account is in good standing, you can continue to bank with the credit union.
- A credit union may be more lenient in allowing a member to have a lower personal credit history than a bank. For-profit banks may insist on highercredit scoresof customers than credit unions do for their members, and a low credit score may limit the services a bank gives customers, including denying mortgage or other loan applications.
- Some banks may offer a different range of financial products and services than a credit union.Banks (especially very large banks) may have a slightly different set of services and types of accounts than some smaller credit unions. However, many credit unions like Delta Community offer a full suite of financial services and have also expanded their array of services into money management areas such asinsurance,retirement planning, and investments.
- Banks may have more physical, owned branch offices and ATMs than credit unions. Unlike many credit unions, banks may have hundreds of branch offices and automated teller machines (ATMs) across a state, a region, or the entire U.S., so it can be easier to visit a bank branch than a credit union branch. However, credit unions—such as Delta Community—may be part of a shared branch network that allows members of one credit union to perform various transactions at another credit union’s branch offices. Delta Community is part of the CO-OP Shared Branch network, which allows it to serve members outside of the states where it has its own branches. Also, credit unions may belong to large,national ATM networksthat expand the ATMs available to members beyond those that the credit union owns, helping to offset banks’ greater number of ATMs. Delta Community is connected with the CO-OP ATM network, which provides access tomore than 30,000 ATMs in the United States.
- Credit unions and banks both provide sophisticated online and mobile banking.If a customer would rather bank from alaptop computer or cellphone, then banks and credit unions offer services either online or from a mobile application. Delta Community’s Mobile App has won industry awards and its website has robust Online Banking capabilities.
- Both banks and credit unions offer various types of financial services and accounts for individuals and businesses, including (but not limited to) savings and checking accounts, auto and other personal loans, mortgages, and some types of investments, such as Certificates of Deposit.
- Account deposits at both banks and credit unions are insured by the United States government, up to $250,000 per account. Banks are insured by theFederal Deposit Insurance Corporation(FDIC), but credit union deposits are protected by theNational Credit Union Administration(NCUA).
So, should someone be a customer or a member?
After comparing both types of financial institutions, is it better to be a bank customer or a credit union member? The answer to that question depends on what type of financial services an individual needs now and in the future, and what sort of company culture they prefer to deal with. Everyone’s needs are unique, and needs change over time, so a financial institution that meets someone’s needs when they are in their 20s may not be what they need in their 50s. When shopping for financial services, it’s important to do research, including looking into what services are offered by a financial institution, checking online reviews for customer or member experiences, getting referrals from family, friends and colleagues, finding out how many branches and ATMs the company has (and where they are located), and digging into any other publicly available criteria that will help determine the choice of a financial services provider.
Looking for some more money advice?
For more information that may help you manage your finances at any age, look into the free Delta CommunityFinancial Education Centerwebinars on a range of prudent and useful financial topics. Please visit the Financial Education Center'spage to register for its on-demand webinars.
The Credit Union’sbloghas more recommendations on managing money that could be educational and helpful:
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- Making tough financial choices in a tough economy
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- 10 steps to financial success: part two
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- Buying a car: credit union financing vs. dealership financing
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BALANCE™ in life is important
BALANCE™ is a financial education and counseling organization that offers free services to Delta Community members. Some of its services include credit report reviews, debt management, and information on budgeting, money management and home buying.
Visit the BALANCE™websiteto learn about their education and assistance programs. Members can also speak with certified credit and housing counselors to get personalized guidance.
Want to connect with a Financial Coach about your specific situation?Chat online,e-mail,or call 1-888-456-2227 to speak with a Financial Coach today.
Note that the services offered through BALANCE™ are separate and distinct from any business conducted with Delta Community and are not guaranteed by, nor are they obligations of, the Credit Union.