Many people aren’t entirely sure what a Federal Credit Union is, or what the differences are in comparison to banks. There are several differing aspects of a credit union, and many benefits to membership as opposed to belonging to a regular bank. Below, we will define and discuss which aspects make up a Federal Credit Union (FCU).
For the most part, a FCU operates like a regular bank, except their customers are members and part owners of the institution. A FCU has chosen to be organized under federal credit union rules and regulations as opposed to state banking laws. The members who deposit money into credit unions are the members that benefit from a credit union’s services. Membership and part ownership are major aspects of attraction for people considering switching to or opening accounts with a credit union. Membership eligibility generally focuses on these factors: your employer, families who are members, geographic location, and your community involvement in a group membership such as a church or homeowners’ association. In the past eligibility for membership has been very specific and precise, but in recent years it has become easier to become a member of a credit union.
Since Federal Credit Unions operate as not-for-profit financial institutions, they focus on the satisfaction of their members as opposed to using them as a profit center. Their interest lies within their member’s contentment. The funds and profits the credit unions generate are returned to members through lower interest rates on credit cards and loans, and higher interest rates on savings accounts. These not-for-profit financial institutions team up with other Federal Credit Unions to create a vast shared network, allowing members to handle their finances and banking needs around the country at cooperating branches. Also, because they are not-for-profit, credit unions don’t have millions to spend on marketing and advertisement like the corporate bank branches do. They rely heavily on testimonials and word-of-mouth advertising, so their outstanding service is key.
Arguably one of the most well-known characteristics of a Federal Credit Union is their orientation toward member service and hospitality. Most credit unions are local and involved within the community they serve, so they tend to focus on the individual members and cater to their needs. Federal Credit Unions often establish relationships with their members in order to offer customized and unbeatable service, and to differentiate themselves from other banking corporations.
Overall, there are several differences between a Federal Credit Union and a regular bank. To recap, these differences include their regulations as a not-for-profit, their focus on service, and their membership program.