Closed! Now what?
Imagine your local bank has closed and the only place you have to cash your paycheck is at a check cashing store that charges a large processing fee.
Residents all over the country have found themselves in this situation when banks close branches. It's happened in Brooklyn, N.Y., Oakland, Calif., and many cities in between.
This unfortunate situation highlights a major difference in ownership between banks and credit unions.
While banks and credit unions offer similar services, your credit union is totally different in the way that it's organized and how it operates.
Banks offer financial services to customers—the people and businesses who deposit and borrow from the bank. Banks can serve anyone and everyone. Originally, banks mainly served the individuals and businesses in their local community or town.
Times have changed and banks have gotten larger and are capable of lending millions to major corporations, and some even grant loans to other countries. With such a widespread market some banks today operate only on the Internet.
Besides the difference in size, banks also have a different business model. Banks are in business to make a profit to pay their stockholders for their investment of cash. A paid board of directors and senior managers run the bank.
The credit union difference
Credit unions are financial cooperatives.
By comparison, credit unions are financial cooperatives. A cooperative is an enterprise or organization owned by and operated for the benefit of those who use its services, the members.
Rather than focusing on creating profits to benefit a few stockholders as a bank does, a credit union shares its income with all its members.
Profit sharing takes the form of higher interest rates paid on savings, lower rates charged on loans, and better services.
The people who use credit union services are known as members, not customers. By law, a credit union can serve only the individuals and their families within its chartered "field of membership."
Your credit union's field of membership may cover employees who work for the same company, people who attend the same church, or the residents of a defined community.
Credit unions primarily serve individuals, and...