Credit union membership also makes you an owner

“Akamai Money” seeks out local experts to answer questions about business in Hawaii. If you have an issue you would like us to tackle, please email it to business@staradvertiser.com and put “Akamai Money” in the subject line. 

QUESTION: What is the main difference between a bank and credit union?

ANSWER: From the outside, credit unions may seem the same, but they differ in several key ways. 

Credit unions are nonprofit financial institutions owned by the members. Each member is an equal owner of the credit union. Regardless of how much money you have, every person has one vote.

They are generally managed by volunteer (unpaid) boards of directors, democratically elected by the members. To serve, they must be members of the credit union and complete required educational courses once they are elected. 

Another important difference is that profits are given back to the members in the form of more services, lower fees and better rates.

"Eligibility" is another key difference. A particular credit union does not serve anyone. They must fall within a specific group or geographic location to become a member and receive services.

The good thing is that once you become a member, you are a member for as long as you keep your account open even if you no longer fall within the field of membership. If you close your account and no longer fall within the field of membership, you will not be eligible.

Q: So membership in a credit union is limited to certain groups, but some credit unions are open to 

all residents of a large area, such as all residents of West Oahu. Why is that, and how do I find a credit union that I can join?

A: The federal and state government set up rules governing credit unions. To receive a charter, a credit union must serve a particular area or group. The regulators determine what is reasonable based on community needs and market viability.

Not too long ago, West Oahu was mainly rural with lower population density. That just shows how things change over time.

If you are looking for a credit union, the Hawaii Credit Union League is a great source (www.hcul. org). They can help narrow the search, or you can just ask your nearest credit union. Most credit unions have websites with information including locations and eligibility requirements. 

Q: Do credit unions offer lower interest rates on loans, including credit cards? Are credit union fees generally lower than bank fees?

A: For most consumers, yes. This is because the profits go back to the members that use the service. Not to shareholders.

Q: Are credit unions more limited than banks in the types of loans they can offer?

A: Most consumers will not notice, but there are differences. Business loans are limited to about 12.25 percent of our total assets. Because we are smaller than most banks, the maximum limit on single loan or member is lower. Credit unions normally cater to the average borrower for credit cards, personal loans, vehicle loans (new or used), mortgages and home equity lines of credit.

Q: Do large banks typically offer more services, such as banking via mobile apps, than credit unions?

A: Credit unions offer similar services to retail members. The average person will not see a difference because most credit unions have online, mobile, check cards, reward points, etc. You will see some differences in business services. Those with large volumes and complex needs are harder to serve. Credit unions tend to specialize in serving the low- to moderate-income demographic.

Q: Is it more difficult to get a loan from a credit union than a bank?

A: Typically, it is easier 

to get a loan from a credit union because the borrower is typically a member-owner. It is hard to tell the boss, "No." However, if it is in their best interest, we will decline the request and try to show them what they must do to qualify in the future. We do not want them to incur debt they cannot afford or pay excessive fees. Our mission is to promote thrift, which means good financial education.

Interview by David Butts