What is the difference between a credit union and a bank?

Like banks, credit unions accept deposits and make loans—but unlike banks, credit unions are not in business to make a profit. Banks exist to make money for their stockholders, not for their depositors. Credit unions exist solely to serve their member-owners, and benefits are returned in lower loan rates and higher deposit rates.

Credit unions are the only democratically controlled financial institutions in the U.S. Members elect a volunteer board of qualified individuals to oversee the credit union and the president reports to this board. Bank directors, however, are paid and legally bound to make decisions that benefit stockholders, not customers. For example, last year, on average, each credit union member got a direct financial benefit of $62. That came from lower rates on home loans and vehicle loans, higher returns on savings accounts, and lower and fewer fees than he or she would have paid by doing business with a bank.

Credit unions are focused on people, not profits. But that $62 benefit is only an average. Active members who use many credit union services often see even greater benefits. The annual difference amounts to about $6 billion spread among 97 million credit union members nationwide.

Source: aSmarterChoice blog