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Credit Unions
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Banks
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Account Holders
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Account holders are called “members.” Each member
is part owner of the credit union. Credit unions are also required
to serve a defined Field of Membership, based on a common bond of
employment, association or community. Bylaws further define for each
credit union the common bond requirements it must meet. Credit unions
may serve only the members who fit these parameters |
Banks can serve anyone in the general public, but their
account holders have no ownership interest in the institution. Banks are
owned by investors who may or may not be account holders. |
Structure
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Credit unions are not-for-profit – in business primarily
to serve their members. If a credit union has excess earnings after
reserve requirements are met, those earnings are used to offer the
members lower interest on loans or higher interest on savings, to offset
costs so as to limit the need for fees, or to develop new products and
services for the membership. Excess funds can also be paid back to
members as a dividend. |
Banks are for-profit, meaning their primary purpose is to generate
profits for their stockholders. In banks, only the stockholders –
not account holders – get a share of the profits. |
Governance
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Credit unions are democratically controlled, meaning each
member has a say in how the institution is operated. Credit union
directors are volunteers elected by and from the membership. Each
member, regardless of how much money they have on deposit, has one vote
in electing board members. Members can also run for election to the
board. |
At banks, only stockholders have voting privileges. Account
holders don't have voting rights, cannot be elected to the board, and
have no say whatsoever in how their bank is operated. Bank directors are
paid, though they may not be from the same community the bank is in and
may not even use the bank’s services. |
Salaries
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Compensation for credit union chief executives is far below that of
bank CEOs; the average credit union chief earned just $77,490 in salary
and benefits in 2005. Sixty percent of the federal credit union CEOs
examined had total compensation of $75,000 or less while eighty percent
made below $100,000 in total compensation. |
On average, annual bank CEO compensation (at $353,000) is more than
four times greater than what credit union chief executives earn. But
even comparing like-sized institutions, credit union execs earn less:
small bank CEOs make almost two and a half times what CEOs of small CUs
earn and large bank chiefs make almost one and a half times what CEOs of
like-sized CUs earn. |
Insurance
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Credit union accounts are insured to at least $100,000 by the
National Credit Union Share Insurance Fund (NCUSIF). The fund is managed
by the National Credit Union Administration, an agency of the federal
government. |
Banks accounts are also insured to at least $100,000. Their
insurance fund is called the Federal Deposit Insurance Corp., also an
agency of the federal government. |
