What is a Credit Union?
A credit union is a type of financial organization that is owned and governed by its members. Credit unions provide members with a variety of financial services, including checking and savings accounts and loans. They are non-profit organizations that are intended to provide high-quality services to its members, not to maximize profits. In addition, they are actively involved with the community.
Credit unions are financial organizations that are structured in a cooperative model. Members purchase shares in the organization. The money from the members is pooled together and used to provide financial services to the members.
Credit Unions vs. Banks
Although credit unions provide many services similar to the services provided by banks, the two financial organizations are significantly different from each other:
1. Ownership and Governance
Credit unions are owned and governed by its members. Any person who becomes a member can actively participate in the affairs of the organization by direct voting. For example, all members participate in the election of the board of directors.
On the other hand, banks are usually owned by a small group of shareholders. Shareholders participate in the bank’s governance by electing a board of directors, while regular customers cannot participate in the exercise.
The main goal of credit unions is to provide financial services to its members, while banks focus on maximizing their profits.
Due to their non-profit nature, credit unions can usually provide their members with services at lower costs. They typically charge lower fees for the maintenance of accounts and provide a broader variety of loans at lower rates relative to those offered by banks.
However, the credit unions’ narrow profit margin does not allow them to keep the same operations exposure as the banks. Credit unions tend to operate fewer branches and ATMs than banks, and lack more advanced technologies for their online banking services.
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