UFCU Sponsored Content: What is a Credit Union, and How is it Different From a Bank?

Financial

UFCU SPONSORED CONTENT — A credit union and a bank are not the same things. Although credit unions offer many of the same services as banks – like checking and savings accounts, loan products, investment options, and credit cards – credit unions have some key differences when compared to banks. A list of credit union principles inspires these fundamental differences.

These simple principles serve as a kind of guidepost by which credit unions operate and ultimately better serve their Members. Here are three remarkable credit union benefits and the guiding principles that make them possible.

1. Providing Better Rates and Fewer Fees

Credit unions are not regular companies. Credit unions are not-for-profit organizations that exist to serve their members, which means many credit unions can offer higher interest rates on savings and investments and lower rates on loans and credit cards to help Members as much as possible. Credit unions also tend to have fewer and lower fees than banks. They can do this because their Members own them.

One principle is that credit unions depend on their Members’ economic participation. That is, Members contribute to and democratically control the capital of their cooperative. Every Member has an equal say, regardless of their tenure or how much money is in their account. This principle directly benefits Members because credit unions typically offer better rates,  fees, and services than their for-profit counterparts.

2. Putting People First

Credit unions are cooperatives, which means they are owned and operated by their very own Members. There are no payments or dividends for outside stockholders as with traditional banks. Instead, any profits are given back to Members in the form of lower rates, higher interest, lower fees, and other credit union discounts. By operating as a not-for-profit cooperative it ensures the credit union is Member-focused instead of being focused on making as much profit as possible for outside stakeholders like traditional banks.

3. Supporting the Community

Many credit unions operate under a social purpose: They strive to not only assist their Members but all of the individuals in the communities they serve. Often this includes serving populations who are underserved.

While credit unions offer similar products and services to traditional banks, they provide different, tangible benefits that can make a difference to Members and their communities. Visit Cornerstone Credit Union League to read the seven cooperative principles that many credit unions in Texas follow, including UFCU.

For additional tools, resources, and guidance that will put you in control of your financial health, visit PlanU.UFCU.org.

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