Not-for-Profit Financial Institutions

Many banks and financial institutions work to maximize profits for their shareholders. However, there is another type of financial entity that is structured quite differently from mainstream banks and investment funds. 

These entities are typically not-for-profit credit unions, a member-owned banking business model that lets investors save and grow their money. A credit union is a community-based financial institution where profits do not go to shareholders but instead are passed onto customers in the form of better interest rates.

Not-for-profit credit unions refer to their customers as members, by whom they are collectively owned and operated. Unlike banks, credit unions often serve the needs of a specific group of people, such as residents of a particular neighborhood or employees of a particular company. 

Choosing to keep your savings with a not-for-profit financial institution means that you may be able to access better rates and contribute to a potentially more inclusive model of community banking.

Key takeaways

  • Community-based: Credit unions provide community-focused services to their members while offering them a stake in the ownership of the union.

  • Better rates: Because they do not need to distribute profits to shareholders, not-for-profit profit credit unions often offer more attractive interest rates than for-profit banks. 

  • Inclusive: Credit unions are often driven to provide financial services to underserved and disadvantaged communities.

What are credit unions?

Credit unions are not-for-profit financial cooperatives that provide a wide range of financial services to their members. They are owned, operated, and managed by members who enjoy equal voting rights in the organization's governance. Not-for-profit credit unions are also exempt from paying corporate income tax. 

Credit unions are typically structured as community-based organizations that serve the financial needs of a specific group of people. This can help them to better understand the community and offer customized solutions. To this end, they offer products and services such as savings and checking accounts, loans, credit cards, mortgages, and other financial products. 

Unlike traditional banks, credit unions are less likely to be focused on maximizing their profits. Instead, they may prioritize the economic well-being of their members and aim to meet their unique needs by promoting good financial practices.

How are credit unions different from banks?

Credit unions are distinctly different from standard banks in several ways. Some of them are: 

Ownership: Credit unions are owned and operated by their members, who have an equal say in the institution's administration. Banks, on the other hand, are owned by shareholders whose main goal can be to maximize profits.

Purpose: The purpose of credit unions is to provide affordable financial services to their members. Their priority is the financial well-being of their members. Banks, conversely, are more focused on generating profits for their shareholders.

Deposit insurance: Credit union deposits are insured by the federal government through the National Credit Union Administration (NCUA). Deposits made at banks are insured by the Federal Deposit Insurance Corporation (FDIC).  

Not-for-profit status: Credit unions are not-for-profit organizations that use their profits to offer more attractive financial solutions to their members. Some also distribute their profits among members as dividends. Banks, on the other hand, use their profits to exclusively increase shareholder value.

Membership: Credit unions are often community-based organizations serving a specific group of people with a particular state or geographical area or place of employment (although Raisin customers are able to become members of credit unions for free and without such restrictions). Banks are generally open to anyone who meets their eligibility requirements. 

Fees and interest rates: Credit unions often charge lower fees and offer better interest rates on loans and savings accounts than traditional banks. That is possible because credit unions are not-for-profit in nature.

What advantages do credit unions offer?

Because of their distinct structure, credit unions are in a position to offer a range of advantages not found in traditional banks. They include:

  • Lower fees: Credit unions typically charge lower fees for their products and services. This makes credit unions far more accessible to underserved and underbanked communities besides being generally more attractive to the average customer. 

  • Better interest rates: Credit unions usually offer higher interest rates on savings accounts, CDs, and other investments than for-profit banks. This allows members to earn more on their money and build their savings faster. 

  • Lower borrowing costs: Typically, not-for-profit financial institutions offer lower interest rates on loans, credit cards, and mortgages.

  • Access to financial education: Credit unions often provide financial education and counseling services to their members. This is designed to help members learn about saving money, make informed financial decisions, and boost their financial literacy.

  • Member ownership: Credit unions are owned and operated by their members. This gives members a say in how the credit union is run and ensures that the institution is focused on meeting the needs of its members rather than the pursuit of profits.

Find the right not-for-profit institution on Raisin

Just like banks, credit unions come in a variety of shapes and sizes. It can be quite challenging to find one that you’re eligible for, offers the products and services you require, and is generally a good fit with your long-term financial goals. 

Raisin makes negotiating the world of credit unions a breeze. All credit unions listed on our platform are NCUA-insured, which means your savings are secured up to per-depositor, per-institution limits. But that’s not all! 

Raisin partners with a range of credit unions that have a long history of supporting communities, working families, and worthy causes. Some of them are nearly a century old! 

What’s more, you can operate accounts with multiple credit unions and banks on our platform with a single login. Come explore the wide range of financial products and services available on Raisin today!

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