October 18th is International Credit Union (ICU) Day®, the 70th annual celebration of the great work that credit unions are doing. This is the perfect opportunity to talk about the differences between credit unions and banks and why a credit union is the right choice for your financial services.
As cooperatives, credit unions are owned by their members. To become a member, you need to make a small deposit into a savings account called a share account. This represents your ownership interest in the credit union. Banks are like any other for-profit business and are owned by shareholders. Those shareholders are not necessarily customers of the bank and might have different priorities than the customers, like maximizing profits instead of increasing services or lowering fees.
Related to ownership, the governance structures of credit unions and banks are different. Credit union members elect the Board of Directors for the credit union from the members themselves. Credit union Board Members are unpaid volunteers. Banks have paid boards that are elected by their shareholders.
Credit unions are not-for-profit financial cooperatives. While a bank’s surplus earnings go to their shareholders, a credit union’s surplus earnings get reinvested into the credit union. Because surplus earnings are reinvested into the credit unions, credit unions generally have better rates and lower fees than banks.
To become a member of a credit union, you need to meet its field of membership requirements in order to be eligible. For example, membership at Guardian Credit Union is open to those who live and work in the seven counties of southeastern Wisconsin (Milwaukee, Waukesha, Washington, Ozaukee, Racine, Kenosha, and Walworth) and members of their immediate family. The field of membership keeps a common bond amongst credit union members. Other examples of fields of membership include a common employer, school, or place of worship. In contrast, anyone can become a customer of a bank.
Because of the common bonds of credit union membership, members are part of a shared community. Credit unions reflect that community through the services that they provide. For example, Guardian Credit Union supports local charities through our annual Guardian Cares fundraiser and provides gifts and clothing to member families in need around the holidays through our annual Seasons of Giving fundraiser. Supporting our community is at the core of the credit union mission.