Credit Unions

Banks

This column describes for-profit banks, which hold over 95% of total state-chartered bank assests in the state.

 Account Holders

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

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

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

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

Credit union accounts are insured to at least $250,000 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 $250,000.  Their insurance fund is called the Federal Deposit Insurance Corp., also an agency of the federal government.