Banks Vs Credit Unions

BANKS VS CREDIT UNIONS 2

Banks v/s Credit Unions This paper will discuss the many differences between banks and credit unions. Banks offer a range of financial services such as checking, savings, and other services. They are organized as corporations with investors contributing the money to operate. However, a credit union is a user- owned, non-profit, cooperative that serves to benefit its members (Kapoor, Dlabay, & Hughes, 2010). Credit unions are smaller and have a more personal vibe than banks. The environment is not as shirt and tie as the big banks and the tellers get to know their members on a more personal level. Because they have

They provide members the opportunity to own their own financial institution and help them create opportunities such as starting small businesses, building family homes, and educating their children. Service to the poor is blended with service to a broader spectrum of the population, which allows credit unions to offer competitive rates and fees, where as banks typically serve middle-to-high income clients (Mazure, 2011). “With certain growth strategies anchored in the quest for competitiveness, the temptation to provided banking services to those that are profitable leaves the disadvantaged by the wayside. For this reason, the challenge for credit unions is to help create inclusive economic solutions (Giagnocavo, Gerez, & Sforzi, 2012)”. Any money a credit union has left after all expenses are passed back to the members in the form of lower interest rates and loans.

BANKS V/S CREDIT UNIONS

Since the credit unions depositors are always its owners, there is no conflict of interest between the depositors and equity owners as it is in the big banks. The logic is that banks need less government monitoring and investment restrictions. Moreover, credit unions differ from other types of mutual banks in that the depositors are also the borrowers. Throughout most history, the credit needs of the poor were met by banking institutions specifically created and designed to appeal to them. Credit unions were an innovation to give the poor control, choice, and ownership over their money with the protection of federal insurance. Mainstream banking has abandoned poor areas by shutting down branches and also by failing to speak the financial language of the poor (Feinberg & Rahman, 2006). Today credit unions are much like mainstream banks. The American Banking Association has continually argued that credit unions are not fulfilling their mission to serve the underserved. The expansion of credit unions allowed them to compete with banks while enjoying favorable tax and other regulatory exemptions which created an uneven playing