Differences between
Banks, Credit Unions and Savings Institutions
The Difference between a Bank, a Credit Union and a Savings Institution
Terms like bank, credit union, and savings institution may seem interchangeable
today. But there are some distinct differences between them in terms of
business purpose, ownership and governance.
Chartering Authority, Deposit Insurance and Regulatory Examination
Banks, Credit Unions and Savings Institutions operate under federal or
state charters. Their deposits, up to $250,000, are insured by one of
two federal agencies: the Federal Deposit Insurance Corporation (FDIC)
or the National Credit Union Administration (NCUA). All institutions are
subject to periodic regulatory and federal insurance examination.
Ownership and Governance
Bank
Banks are community, regional or national for-profit business corporations
owned by private investors and governed by a board of directors chosen
by the stockholders.
Credit Union
Credit unions are non-profit financial cooperatives owned by their members
and governed by a board of directors elected by, and from among, those
members. Usually there is a common bond among the members, such as belonging
to the same organization or living in the same geographical area. Credit
unions accept deposits from their members and use them to make short-term
loans. Deposits are regarded as purchases of shares, and all earnings
of the credit union are paid out as dividends to members
Savings Institution
Savings institutions (also called savings & loans or savings banks)
specialize in real estate financing. They can be either corporations or
mutuals (a type of business where making a deposit is like purchasing
stock in the organization). Savings institutions always have the letters
SSB or FSB after the name to indicate whether they are a state savings
bank or a federal savings bank, respectively. Both types are governed
by an elected board of directors.
Range of services
All financial institutions usually offer basic banking services (checking
and savings accounts, consumer loans, etc.) with larger ones offering
a fuller range of services (credit cards, mortgages, foreign currencies,
etc.). Each has some special features:
- Banks emphasize business and consumer accounts, and many provide
trust services
- Credit unions emphasize consumer deposit and loan services
- Savings institutions emphasize real estate financing
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