Difference between banks and credit unions?

10th Nov 2009 by Tom Lindmark

In many respects there is little or no difference between the two. Both accept deposits -- checking and savings, issue CDs, make loans and generally do everything that you would expect. The major difference is that credit unions are exempt from paying federal income taxes and in some cases state income taxes. They receive this exemption because the depositors are the owners of the credit union and any excess profits go to them. Effectively, a credit union is a non-profit business entity. For this reason you can sometimes get better interest rates on deposits as well as loans but be forewarned that sometimes the service level -- availability of ATMs for example -- is not as good. Also many credit unions require that you have some sort of affiliation to bank with them. If you have an interest in doing business with a credit union just call around until you find one that will accept you.

This answer is the subjective opinion of the writer and not of FinancialAdvisory.com