BANKS AND CREDIT UNIONS..WHAT'S THE DIFFERENCE
I am often asked by my customers about what the difference is between a bank and a credit union especially when one of my Louisville buyers is looking for a mortgage loan source. I am probably asked the same question several times in a month.
To be as brief as possible:
Bank and Credit Unions are more alike than they are different. The key philosophy behind them are different in that banks operate with the goal of generating profits and credit unions are community based institutions that are non profit. In credit unions, you must have a membership and it requires that you have an account with minimum deposits, and each member is a part owner in the credit union. The higher the deposits, or shares, the higher the share of profits.
The credit union has a Board of Directors who makes the major financial decisions. A bank is owned by a private company or corporation. Most credit unions usually finance small projects related to community development and try to keep money within the community. Banks, on the other hand, tend to finance larger projects and they may or may not be in the community where the bank is located. Usually the interest rate charged by banks is a little higher than what credit unions charge.
Credit unions are exempt from paying most state and federal taxes and therefore usually able to offer higher savings account rates and usually lower rates on loans. Banks also tend to have larger variety of products and services that allow you to centralize your banking needs. One of the biggest disadvantages in joining a credit union is their relative inconvenience as they typically have less ATMs and branches and usually lack variety in investment products and services.
Choosing a bank or credit union is all about what's suitable for your own particular needs. There can be differences in rates and services in different credit unions. It is best to check out the credit unions that you may be eligible to join and your bank to see what type of mortgage loans are offered and their going rates.