…community banks are more similar to large banks than to credit unions because, well, they are banks, there’s just no getting around that fact.

With Bank Transfer Day in November 2011, and the bubble burst in 2008, many people have been advocating for community banks and credit unions. Having worked at both types of institutions, I felt that I was uniquely qualified to give some perspective on this topic.

I started my career in the “banking” industry with a community bank. I loved the fact that I saw the same “customers” frequently enough that I could get to know them and could greet them by name. I know they loved it too because we were able to provide them with more personalized service.

I worked for two community banks (one as a temp) over the course of nearly two years before I found the magical world of credit unions, and boy was I surprised at the difference! Not just as an employee, but also from a “customer” or “member” standpoint.

Mind you, the purpose of this is not to bash community banks, because they do have their place, apparently. The purpose of this is to bring to light some of the differences that people may not be aware of when choosing a bank or credit union.

  1. Community banks, like the large banks, are still run by a paid board of directors who get the final say in how things are run, whereas credit unions are a democracy where each and every member gets one vote on how things should be run. Ever received a notification about your credit union’s annual meeting? If you’ve never attended, you should! This is where you get to exercise your right to vote on things such as who sits on the board of directors.
  2. All banks, including community banks, are required to abide by the Community Reinvestment Act (CRA), which is meant to provide banking and credit opportunities to underserved communities. You may be asking yourself why credit unions are not bound by this. The answer is simple: credit unions already do that. It is part of being a credit union. Credit unions exist to better the lives of their members which often times includes reaching out to the community in various ways.
  3. As mentioned in point #1, the board of directors for banks large and small are paid. Their shareholders, generally a limited group of people who can afford to invest in a bank, are also paid out on their shares. This does not exclude community banks. The income that they earn from your loans and the fees that you pay, once expenses are deducted, go to the board and shareholders. Credit unions have a volunteer board of directors and credit union members are the shareholders. Any income that is generated, after expenses, goes to the members in the form of lower loan rates, higher deposit rates, and lower/fewer fees.
  4. Banks, including community banks, don’t generally have any type of financial education goals or programs because it is not their focus. Their focus is to grow deposits and loans in order to turn a profit for their shareholders. Part of being a credit union is, as previously mentioned, helping to better the lives of the members. Financial education is a very important part of that because credit unions seek to help people get to a point where they are able to make sound financial decisions to better their lives.

So to sum up, community banks are more similar to large banks than to credit unions because, well, they are banks, there’s just no getting around that fact. You may get more personalized service with a community bank than with a large bank, but they are nowhere near as awesome (in my humble opinion) as credit unions.

And one further point that I would like to make before I bring this lengthy post to a close is the employees. In my experience, credit union employees are far happier than those who work at banks, community or otherwise. This is because credit unions not only care about their members, but they care about their employees too, and it shows! Have you ever gone someplace (any place really) where the person helping you just has a sour look on their face and thought to yourself, “Boy, that person must really hate their job!” I know I have. Now ask yourself how often you find that at your credit union. I bet not often, and if you have it is likely that you just happened to catch that person on an off day.

So when you consider where you want to keep your money, think about what you want out of an institution that will be holding your money for you. If you value lower loan rates, higher deposit rates, your community, financial education, and just plain great people, a credit union may be right for you…maybe even Verity!

Crystal Mutter

No biography available for this writer.

2 Responses

  1. Sasha says:

    Excellent post, Crystal! I appreciate the perspective you bring from your experience – and the way you’re able to explain the differences. I look forward to your next post!

  2. adrianjill says:

    Great post.The differences are so interesting and easy to understand.

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