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
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 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 institutions (also called savings & loans or savings banks) specialize in real estate financing. They can be either a corporation or mutual (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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