A Bank Alternative: FAQs About Credit Unions
Banks provide many critical business services – business checking accounts, loans, financial advisors – but credit unions are another provider to consider if you run a small business. If you haven’t heard of credit unions beforehand or want to learn more about how you can leverage them in your business, this blog will give you a concise overview of what credit unions are all about.
What is a Credit Union?
A credit union is a non-profit financial institution that is organized and operated by its members. Members merge their resources in order to provide loans and other services for other membership within the credit union. Many credit unions are federally insured by the National Credit Union Administration (NCUA), but there are others – fewer than 500 – that are not.
A unique characteristic of credit unions is that they are run by members and serve members only. A person must be a member in order to receive and benefit from a credit union’s services. On the other hand, banks are privately-owned, for-profit institutions that serve customers. In other words, customers are not involved in the day-to-day operations nor do they effect the goals and objectives of the bank.
Why Would I Become a Member of a Credit Union? The benefits of being a member of a credit union stem from the nature and structure of credit unions. Since members run the board, members are both the customer and the service provider at the same time. Therefore, members have greater influence over how the credit union is run, as well as have greater decision-making power within that credit union. Conversely, you, as a customer would have no say or influence over the operations of a bank.
Since it is member-run, a credit union will also focus on services and savings for their own members. This objective generally leads to lower interest on loans and credit cards, lower cost services, and higher interest rates on savings compared to those of banks. Furthermore, credit unions are tax-exempt because they are non-profit organizations.
When Would I Rather Go to a Bank? As credit unions are community-based, they offer limited services and are less accessible. You can find several banks in just about any country and city in the world, but your credit union probably offers services in much more limited locations. Furthermore, credit unions may charge more for extra services like ATM transactions because they do not have the same leverage that bigger banks do.
For more information on banks, see our article on Selecting the Right Bank for Your Business.
Assessing Your Needs Banks and credit unions both offer benefits to their customers. Thorough research and honest assessment of your business’s needs will help you decide which service is the best fit for your business.
