Describe how Credit Unions are different from banks.

Expert Solution

Credit unions:
1. They are not for profit. That is they are service driven.
2. They are owned by the members.
3. They are not taxable.
4. Board of directors are on a volunteer basis.
5. Interest rates are higher than banks in most cases.
6. Fees are lower than banks.
7. They are less accessible compared to banks.
8. Higher risk element involved because it's not managed generally by as professional people like banks, related party risks, less strict regulation compared to banks.

Banks:
1. They are for profit. That is they are Profit-driven.
2. They are owned by shareholders. Shareholders can be public or private or both.
3. They are taxed.
4. There is compensation paid to the board of directors.
5. Interest rates are lower than the credit union in most cases.
6. Fees are higher than credit unions.
7. They are less accessible compared to banks.
8. Low-risk element involved because it's managed by professional, less related party risks, more strict regulation compared to credit unions.

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