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Difference Between A Credit Union And a Bank

CREDIT unions are not-for-profit organizations that exist to serve their members rather than to maximize corporate profits. Like banks, credit unions accept deposits, make loans, and provide a wide array of other financial services. As member-owned institutions, credit unions focus on providing a safe place to save and borrow at reasonable rates. Unlike banks, credit unions return surplus income to their members in the form of dividends and patronage refunds.

Membership Access
In order to join a credit union, potential members must be part of a field of membership, which is typically based on one’s employment, community, or membership in an association or organization – commonly referred to as the ‘common bond’ . As credit unions usually serve members of modest means, many will actively expand their field of membership to serve other select groups and/or geographic areas when identified as needing access to affordable financial services – usually in the form of mergers/amalgamation. Credit unions designated low-income predominately focus on providing financial services at reasonable rates in areas that are often underserved or un-served by banks. ‘Credit Unions tread where banks fear to go’. This statement was articulated by Prime Minister, Dr. Kenny D Anthony, on September 22, 2014 to participants of a Caribbean Credit Union Development Education Programme at Villa Sta. Maria, Coubaril, Castries, Saint Lucia.

Favourable Rates and great Customer Service
Fees and loan rates at credit unions are generally lower, while deposit dividends and interest rates are generally higher than banks and other for-profit institutions. Credit unions are democratically operated by members allowing account holders an equal say in how the credit union is operated, regardless of how much they have on deposit at the credit union. Credit unions have always shown that size of financial assets does not equate to quality of service.

Loan Protection and Life Savings Insurance
When you take out a loan, it’s important to strike the best deal you can. At credit unions, taking out a loan can include valuable insurance coverage in addition to providing funds to meet important financial needs. That’s because they provide Loan Protection Insurance to eligible members on insurable loans. Loan Protection Insurance is term insurance which covers the insurable balance of credit union loans up to the agreed amount set by the board of directors of each credit union. It covers all the eligible loan balances of a credit union member against untimely death or total and permanent disability. (Excluding real estate/mortgage loans) Loan Protection Insurance is offered by credit unions at no direct cost to members. No physical exam is required, and the coverage is automatically in effect when you get your loan, as long as you meet the eligibility requirements. It’s a great way to help plan your family’s financial future.
Life Savings Insurance provides matching funds against one’s share savings account in the event of a member’s death. This amount set by the board of directors of each credit union– in the case of an accidental death the amount is tripled. This coverage is provided at no additional cost to members.

By V. Chris Williams, SLUWCU

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