On the surface, banks and credit unions look pretty similar. So what are the major differences?
- Mission: Banks are profit-making enterprises. Just like any other corporation, banks use those profits to strengthen the company, provide bonuses to executives, and pay dividends to the shareholders. Credit unions, on the other hand, are not-for-profit organizations. The focus of a credit union is not on maximizing profit, but on supporting the community by providing members with the best possible products and services at the lowest possible cost. Any surplus income earned is returned to the members in the form of dividends.
- Ownership: Banks are owned by shareholders, while credit unions are member-owned. Credit union membership is made up of the credit union’s own depositors and borrowers, and is based on a community of some type, such as a common location, profession, church, club, or military affiliation.
- Eligibility: Banks are open to all customers, while credit unions are chartered to serve particular communities, and are required by law to restrict membership to those communities.