Credit unions are financial institutions that operate on a cooperative basis and serve the needs of their members. The primary objective of the credit union is to provide member-centric financial services while promoting their financial well-being.
In this blog, we will explore the various features of a credit union and the differentiating aspects of a credit union from traditional banks in the economy. So, let us read further.
Key Features of credit unions
- Credit unions have membership criteria that determine who can join them. Once you become a member, you can access the services and participate in the governance. For example, Valley Strong credit union is a community-based credit union with location-based eligibility criteria.
- Credit unions are owned and governed by their members. All the members have equal votes and partake in the operations and decision-making processes. The democratic structure of the credit union enables it to serve the interest of the members.
- Credit unions provide personalized, member-centric services and have a community-focused approach to understanding the needs of the members well. Traditional banking, on the contrary, lacks the human connection needed to develop relationships with customers.
- Credit unions offer competitive interest rates on loans and savings accounts. This can result in higher returns on savings.
- Credit unions provide a wide range of services, such as car loans and mortgages, savings accounts, credit cards, and investment options, among others, to meet the diverse needs of the members.
- Credit unions typically have strong community involvement and social responsibility. They participate in local causes and contribute to the well-being of the communities.
- Credit unions are regulated and insured to protect their members’ deposits. It provides security and protection to the members.
Credit unions offer a viable alternative to the traditional banking institutions by prioritizing the financial well-being of its members and inculcating a feeling of shared ownership among them.
There are various other aspects which differentiate credit unions from traditional banking systems. Let us take a look.
Credit Union Vs. Traditional banks
| Credit unions are not-for-profit organizations. Their main objective is to cater to their members’ financial needs and provide them affordable services. | They operate for profit and prioritize maximizing the profits for their shareholders. |
| They have membership criteria, such as geographical location, particular community and so on. | They are open to the general public and anyone can become its customer. |
| They provide personalized and member-centric financial services based on the needs and requirements. | They offer a multitude of services but have a transactional approach to customer dealings. |
| They offer competitive rates on loans and savings accounts. They also offer lower fees resulting in higher savings. | They generally offer relatively higher interest rates on loans and savings accounts as well as fees. |
| They have strong community involvement and contribute towards local causes and communities. | They may also engage in community initiatives but their primary aim is profit. |
| They are regulated and insured to protect their members’ deposits. | This may or may not be the case in traditional banks. |
Wrapping Up
Traditional banking systems and credit unions, both provide invaluable services to the customers and contribute to the economic structure. The choice between the two depends on the individuals’ needs, priorities and requirements.
In this blog, we discussed the various features of credit unions and the major distinction between credit unions and the traditional banking system.
Hopefully, this was helpful.
