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Many people don’t know the difference between credit unions and banks. At first glance, the two are very much alike. In general, they both have checking accounts and savings accounts. They both do loans. They both have branches where you can go to deposit or withdraw money. They both issue checks and debit cards. But underneath the exterior, there are some subtle differences that have a profound effect on the quality and price of the products and services you receive at each:
1. Credit unions are not-for-profit; banks are for-profit
“Not-for-profit” means that all income that a credit union collects during the year is required by law to be given back to the accountholders (in credit unions, called members). This can be in the form of a check at the end of the year, a higher return on savings the next year, a lower rate on loans the next year, new products or services, new/better branches, or one of a number of other ways. In contrast, banks are in the business to make a profit for their shareholders using your money.
2. Credit unions are owned by the members; banks are owned by shareholders
Credit unions are democratically owned and run. Every single member, no matter how much money or how little money they have in their account, owns a part of the credit union and gets exactly one vote in decisions made. Banks are run by shareholders, with the ones who own the most shares having the most influence.
3. Credit unions, because they are not-for-profit, don’t pay corporate taxes; banks must pay them
Because of this, credit unions have less money going out, so that’s more money that can stay in your pocket.
It is these reasons and others that give credit unions an advantage over banks in generally better rates and lower fees all around. This is why you should join Jefferson!