Credit Unions VS Banks

Although many people consider credit unions and banks to be similar, there is actually a big difference between the two. Credit unions offer the same services and products that a bank does (savings accounts, checking accounts, auto loans, mortgages, credit cards, etc), but the difference lies in how the two types of financial institutions are structured.

Banks are “for profit” institutions. This means that anytime they make money through fees and interest rates, after expenses are paid, any additional profit goes to benefit the bank’s stockholders.

Credit unions, on the other hand, are “not for profit” financial institutions. Credit unions are not allowed to show a profit at the end of the year, so any gains that they achieve are returned to the members of the credit union in the form of fewer fees, new services and products, lower interest rates on loans, and higher dividends on savings. This is why more often than not, Sioux Falls credit unions have more favorable rates and fewer fees than any of the banks in town.

Furthermore, credit unions are not owned by stockholders. Instead, every credit union customer is a “member/owner” who owns an equal share of the institution. Instead of having a paid board of directors like banks, credit unions are governed by a volunteer (un-paid) board of directors. Any member that meets the basic criteria can be nominated to serve on the credit union’s board of directors. Nominations are voted on every year at the credit union’s annual meeting by the members, each of which has an equal vote.

Insurance

When you deposit funds in a bank, the FDIC (Federal Deposit Insurance Corporation) insures your deposits up to $250,000. When you deposit funds in a credit union, similar coverage is provided by the NCUA (National Credit Union Association), which also insures your deposits up to $250,000.

Becoming a Credit Union Member

The requirements to become a member of a credit union depend on the way the credit union is chartered. To become a member of Service First Federal Credit Union in Sioux Falls or Salem you must live, work, worship, or attend school in Lincoln, Minnehaha, or McCook County in South Dakota. An initial deposit of $5 in a “Share Savings” account “buys” your share of the credit union and allows you to access the products and services that the credit union offers.

If you would like more information on becoming a member, or have questions regarding credit unions, please drop us a line using the contact form on the side of this page. We are ready and willing to help you out in any way we can!

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