Credit unions are structured differently than banks
Shareholders and investors own a commercial bank, so the bank has a big incentive to generate profits for their owners. Credit unions are owned by the depositor, which means there’s less of an incentive to earn money because that money just goes back to the people who save their money with the credit union.
Higher interest rates on deposits, lower interest rates on loans
Credit unions are able to offer higher interest rates because they don’t have an incentive to generate large profits.
Credit unions are smaller
Most credit unions have a handful of branches and have a smaller footprint than a regional bank. While the smaller size doesn’t guarantee more personalized service, it’s more likely that a smaller bank with fewer customers will spend more time on each person.
Credit unions fail less often than commercial banks
As of the end of May, 44 FDIC insured institutions had failed in 2011 compared to nine NCUA insured institutions. This makes sense because, in general, credit unions take on less risk. Because there is no strong profit motive, they make less risky loans.
The board of directors is staffed with volunteer members
Because the credit union is owned by the depositors, the credit union is also governed and managed by customers. A credit union’s board of directors is made up of its customers and they all serve on a volunteer basis. As for the unusual names for accounts, they also reflect ownership. It’s called a share account to reflect the idea that you are part owner of the credit union.
Original article by Jim Wang at Bankrate.com