Saturday, 18 May 2019

The Different Between Credit Unions Vs Banks


There are many more different types of financial institutions like online banks, state banks, community banks, but I want to talk about credit unions and banks. I think they best illustrate the different mentalities financial have, and how profit motive can change the way that they do their business.

Without wasting time


Let Start With Banks

I just want to say this, despite any of my biases, I don't think banks are bad or evil, they just have a corporate obligation to amass as much money as they can.

Let me expand on that

Big banks the ones that you all know the names of, they are publicly traded on the stock market. People invest in that company, they're called shareholders, so banks have an obligation to make those shareholders as much money as possible. In order to increase the value of their company they need to make money as much as they possibly can, that means the more fees they charge, their company value goes up, the more interest they make on their loans their, the value goes up. Every one of the people that are using their debit card or credit card, their value goes up, so when their value goes up, their share price goes up, the investors make their money, they're doing their jobs.

It's not bad, it's not evil that's just what they're there to do.

Let's remember this they are obligated to make as much money as they can for the investors who invest in their company, that's it. And that doesn't mean that the products or services that they offer are bad it just shows you that ultimately they need to make as much money as they can and the profit motive is their driving force. If I asked one of you to go find a big bank around your city you would have no problems trying to locate one, I mean, they are every were.


Let Talk About Credit Unions

Unlike major banks, credit unions are not-for-profit organizations and they have a board of directors that listen to their members to help steer the credit unions path

Notice that I said the not-for-profit

That's not a nonprofit organization, it just means that their sole purpose is not to make as much money as they can, they probably do, but what they want to do with the money that they make is put that back into the community, give it back to the members. That's why credit union fees and interest rates are normally much more favorable than the banks, they want to give that back to the members, it's not to say that credit unions don't charge fees and that everyone that works there is an angle. But it normally that their goal is to benefit their community and their members which is something that's great.


The Downside OF Credit Unions

The downside is that they are small, like really really small compared to major banks. They're not as technologically advanced they don't have locations on every street corner, I doubt you know a tenth of all the credit union that is in your state.

They don't have all the bells and whistles the big banks have. 

If you are just an everyday person, you work a job, you need somewhere to put your money and want that financial institution to do right by you, a credit union is a great place to go and they can absolutely help you out.





Conclusion

This is a very small portion of the difference between banks and credit unions, but in my opinion, it's the biggest and most significant difference that they have. I truly believe that both serve their purpose and there are certain people that should be using big banks and there are other places that should be using smaller banks or credit unions.

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