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tinyfaery's avatar

What is the difference between a credit union and a bank, and is my money safer at a credit union?

Asked by tinyfaery (41270points) September 18th, 2008

I know. I’m full of questions today.

I did some online research, but it all seems so technical. Can someone explain it a little better? Do credit unions have investments? Where do they get the money for loans and such? We were thinking of closing our bank account and joining the Cal teacher’s credit union. Good idea? It’s not like I have tons of money that I am worried about losing, I just want to know the differences.

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7 Answers

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marissa's avatar

As far as your money being safer in a credit union or a bank, it doesn’t make a difference which it is. What does make a difference is whether the financial institution you use is FDIC insured Usually the benefits of being part of a credit union are better than a regular bank.

Snoopy's avatar

Credit unions have members. In other words you must be a part of whatever group the credit union covers. There are credit unions affiated w/ certain companies, regional areas or even a religion (i.e. you must be an employee of “X”, live within the area of “X” or be a member of “X” church). Not just anyone can walk into any credit union and open an account.

They are not for profit so will typically have better interest rates.

Also, they are insured by NCUA—the credit union’s answer to FDIC. If you see this link, you will find more info on this….

I agree w/ Marissa. At a minimum you need to make sure that whatever bank you choose is insured.

marinelife's avatar

Credit unions are NOT FDIC insured.

Credit unions are non-profit financial institutions that operate for the benefit of their members. Loan interest and fees are returned to the members as interest on checking and savings. Originally, credit unions were groups with a special interest in common (large corporations employees credit unions, union credit unions, etc.) They were deregulated some in recent years.

It is vital with a credit union to make sure it is fiscally responsible and well-managed. Large ones belong to self-insuring credit union pools offering some protection on member deposits.

It is important to do your homework before choosing one.

cwilbur's avatar

@Marina: Credit unions are not FDIC insured, because the FDIC insures state-chartered banks. Instead, credit unions are insured by the NCUA, which is equivalent to the FDIC. There’s no need for “self-insuring credit union pools” to keep deposits safe.

A credit union is basically a member-owned cooperative: voluntary socialism. When you buy membership in the credit union (usually with a deposit of $5—$20), you become a voting member of the credit union. They are run as non-profits, and so tend to offer better rates than banks; and where banks tend to be very interested in acquiring business banking accounts, because they’re profitable, credit unions by their nature focus more on personal accounts.

marinelife's avatar

@cwilbur Thanks for the update. Not all credit unions participate in NCUA which is why I said do your homework. I am a member of and big fan of credit unions. It is just that nothing is without risk.

tinyfaery's avatar

There are a few teacher’s credit unions that I am going to look into. Thanks for the information and advice.

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