As we continue to navigate the financial landscape in 2023, recent events such as the SVB Financial crisis highlight the importance of understanding the differences between credit unions and banks. In March 2023, regulators shut down SVB Financial Group’s bank subsidiary, Silicon Valley Bank, due to concerns about inadequate risk management practices. This event highlights the risks associated with traditional banks that prioritize profits for their stockholders rather than the financial well-being of their customers.
Stakeholders, Not Stockholders
While credit unions and banks may appear similar from the outside, they have fundamentally different approaches to finance, some of which help mitigate risk to your finances. One of the key differences between credit unions and banks is their approach to profits. Banks operate with the goal of making as much profit as possible for their stockholders. This motive often leads to higher fees and interest rates for customers. Credit unions, on the other hand, are not-for-profit and cooperative institutions owned by their members. Rather than focusing on stockholder earnings, credit unions prioritize the financial well-being of their members. This means any profits made are returned to members in the form of benefits such as lower fees and better loan rates.
This also means that as member-owned institutions, credit unions are more accountable to their members on how they conduct business. By prioritizing the interests of their members and working together to provide shared services, credit unions strive to offer a safer and more reliable alternative to traditional for-profit banks.
The Credit Union Movement
The credit union movement has a rich history of working together to serve members better. During the Great Depression, credit unions grew in popularity as groups of workers pooled their resources together to provide loans to co-workers who had been rejected by banks. President Franklin Roosevelt signed the Federal Credit Union Act in 1934 to ensure that not-for-profit credit unions could provide people with an affordable alternative to for-profit banks. Since 1970, deposits in most federally insured credit unions, including Salal, are insured up to $250,000 by the National Credit Union Administration.
There’s Power in Together
Today, there are over 4,700 credit unions in the US that work together to provide services such as CO-OP Shared Branching and ATM Networks. As a credit union member, you have access to over 40,000 surcharge-free ATMs and over 5,800 branches across the country. Whether you’re in Washington State or Washington DC, you can find a branch or ATM in the CO-OP network and perform transactions such as deposits, withdrawals, and money transfers between accounts. You can even move to another state and continue banking with your credit union at the CO-OP shared branch closest to your new home. Additionally, credit unions provided more than $13 billion in direct financial benefits to their 135 million members in the past year, proving that there is power in numbers.
In summary, credit unions and banks may seem similar, but they operate with different motives. While banks prioritize profit for their stockholders, credit unions like Salal prioritize the financial well-being of their members. As a member of a credit union, you have access to many benefits, including lower fees, better loan rates, and a vast network of shared branches and ATMs.
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