What are the five major differences between a bank and a credit union? Firstly, a bank is owned by shareholders either local or foreign whereas a credit union is owned by the members of the credit union. Secondly, when dividends is paid out at the end of the financial year, the shareholders are paid dividends not the bank customers whereas the members of the credit union are paid the dividends based on the number of shares accumulated by the member. Thirdly, a bank will charge a monthly fee for the use an account (ie if the account is being used for depositing and withdrawal of funds) depending on the balance in the account whereas there is no charge when withdrawing from your credit union account. Fourthly, the Credit Union will not charge you for withdrawing money from your shares. Final difference is you don’t have to worry about your credit union account being deemed inactive after 14 months.
There are two main purposes of a credit union: savings and loans. Monday of this week, as my organization’s Liaison Officer for the Credit Union and Supervisory Committee Chair person, I had to have a conversation with an employee who I discovered had paid off a loan using his shares with the credit union and closed the account. Not getting too much into the employee’s personal business, I encouraged him to go and reopen the account and just put $100.00 a month into the account to rebuild his savings. I advised him that it was Ok to start from scratch in rebuilding his shares. He agreed that he would spend more than $100 on fast foods in a month, therefore, he would make an effort to save at least $100 on his shares a month.
I shared with him my car purchasing story. When I was looking to purchase a new vehicle, all I needed was 10% of the purchasing price on my shares in order to qualify for the loan. I selected the Elantra car which I knew, once the loan officer worked the numbers, that I would be able to afford the repayments comfortably and I took the 7 years option.
One note of caution when purchasing a vehicle: When going to sign the legal paperwork, may sure that you walk with the figures that would have been calculated by the loan officer, the period of the loan and that the figures agree with the figures on the agreement. Read the agreement; re-check the chassis number and other information on the certificate of ownership with the information provided on the agreement.
Although a member can borrow one and a half times their shares, the wise decision that I made was to use my shares to repay a loan that I already had with the Credit Union and arrange to have the 10% for the car on my shares thereby having one loan repayment instead of two or three loan repayments which increases monthly repayments and causes a strain on finances.
Last month, upon receiving my statement, I was pleasantly surprised to see the year-end dividends and the growth of my shares.
Credit Unions are great for savings and loans but banks have their role to play. Banking has evolved worldwide and customers need to utilize the services being offered by the banks, to assist customers in saving time. Customers being charged a fee to deposit a cheque is meant to force people to start using the free system put in place by the banks. To improve customer service, banks should have a representative assisting customers on how to use the free facilities for making deposits.
Online banking is a major plus which saves time and reduces the waiting time in a line at the bank. I look forward to the day when I can deposit cheques without having to go to a bank.