Credit Unions vs. Banks
Credit Unions and Banks: Which one is the right choice?
We all love grandpa, the fine old man that he is, but I’m afraid you’ll have to break the news to him that it is no longer acceptable to stuff your money into empty coffee tins and bury them behind the old oak ‘round back. That goes for you too, Mr. or Mrs. Mattress-Stuffer. That may have been enough when you were being paid cash-in-hand, but if you’re trying to get out of the rat race you’ll have to reconsider your economic strategy. I’m afraid it’s time for everyone to consider your options among financial institutions.
Johnny Youngster pipes up: “Hey, wait a minute – you’re talking about banks, right?”
Well yes, Johnny, I am—among other options. Who here can tell me the difference between a credit union and a bank?
(A long silence. Someone in the third row coughs.)
Well, I see we have a lot to learn. Why don’t we begin?
What is a credit union?
I can’t tell you that yet. Credit unions are best understood as an alternative to something far more recognizable—the commercial bank.
So, what’s a bank?
Of course everyone knows what a bank is; that’s because banks are the most popular financial institutions around. A bank provides a variety of ways to store, access and profit on your earnings. Large, national banks, such as Wells Fargo and Chase, provide various services to their customers. In fact, versatility is one of the main attractions to belonging to a bank. Wells Fargo alone offers more than 6,000 retail branches in the US. On top of convenient access, a bank provides many mechanisms to store and access your money (savings account, checking account, credit and debit cards), and can also provide a variety of loans and other financial aid, not to mention more esoteric services such as IRA’s and CD’s.
What, then, is the primary purpose of a bank? Is it to promote good finances among the people? Does it line the pockets of the common man with gold? Absolutely not…unless you also happen to be a shareholder. Banks are, first and foremost, designed to make money for their investors. Every bank is run by a group of investors who provide the capital that goes to running the bank and it is they who reap the profit. Decision-making power resides in the hands of a board of directors who render their decisions based on what will be most profitable for the shareholders, not the bank customers. These may often run parallel to what is good for the customer, but by no means is this always the case. With profit as the bottom line, and enormous amounts of money to be made, a bank is as susceptible to greed as any other corporation, hence the sub-prime mortgage global financial collapse—the result of banks going after quick money despite high risks and the crude implication of derivatives. Derivative trading is a way for banks to lend money they don’t even have, essentially creating ten times more fake “wealth” in the system, something that the infrastructure can no longer handle. Megabanks create artificial scarcity to drive and control the market, positioning themselves in the path of greatest profit as small banks and small businesses burn to the ground around them. The current upheaval in the financial system is a result of a final shift to grab the last of our wealth. If all the money stolen from our pockets was given back to us, every family in America would get hundreds of thousands of dollars. We need to prosecute these criminals and take back our money. In a system based solely on money, there can be no freedom if all that wealth lies with a select few.
Okay, I’m ready – what’s a credit union?
On the surface, a credit union appears to be just like a bank. It provides all the basic services that any bank would provide—savings & checking accounts, loans and more. The key difference is that credit unions are not-for-profit, tax-exempt organizations that are owned by the customers, or “members,” that invest in them. In line with this, the board of directors are elected by the credit union members rather than hired by a room of suits. This makes for enormous differences in the focus of the institution. As a not-for-profit organization only a minimal amount of money goes to keeping the institution solvent, everything else goes back to the members in the form of lower fees on services and better interest and loan rates. This is the real bottom line. Credit unions offer cheaper fees for services, better savings account interest rates and lower loan interest rates, and they do so because they aren’t motivated by squeezing their consistency dry.
So why don’t we all run out and start patronizing credit unions?
Well, for one – credit unions are required to be selective by their very nature. To join a credit union you must fulfill some sort of prerequisite—be that belonging to a particular career, religion, university or simply living in a particular place. Second, credit unions simply can’t compete with large banks in versatility. A credit union generally doesn’t have any branches outside of the region in which they’re based. On top of that, they don’t have the financial clout to offer the same range of services that large banks do. However, the wonders of the internet have led to a rise in the number of credit unions offering online banking and a wider range of services.
Which is right for me?
Obviously, this depends on your situation. Because of the local nature of credit unions, every region is served differently. Consult the oracular powers of the internet to find out which credit unions are available in your area. Because it behooves a union to have a large member base, and because credit unions pride themselves on offering excellent customer service, starting up a relationship with a credit union is a breeze. Many people like to strike a best-of-both-worlds approach by maintaining two accounts, one with a bank and one with a credit union, in order to keep all their options open. Finally, if you’re a small business owner or may otherwise need a monetary loan in the future, you should consider joining a credit union with all haste. Credit unions tend to provide loans more freely, consider applicants more justly, and charge significantly lower rates when compared to banks—particularly in the post-financial crisis economy.
Good luck and don’t get too ensnared in the cobwebs of mega banking. Those hegemonic monsters were built to create poor slaves out of us all, and they are doing a damn good job…
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