Banks and credit unions are both financial institutions where you can have put-and-take accounts and savings accounts. So what's the difference? Initially established for different purposes, today's banks and credit unions are looking more and more like each other, but there are still some major differences. Lately, there's been a lot of controversy about one of those differences - that while banks pay taxes as for-profit organizations, credit unions remain largely untaxed because they're categorized as "not-for-profit" groups. You're going to look into what the big deal is and draw some conclusions about which financial institution is better for you.
What's the difference between a bank and a credit union? In this lesson, you'll research the differences as well as identify the similarities between the two. You'll also find banks and credit unions that are close to you, and decide which is a better choice for you.
Activity 1: Similarities & Differences - What are these things?
Fill in this Venn Diagram with information you find about banks and credit unions. Identify what they have in common in the middle, and what is unique to each in the sides. (Make sure you search for the most important information on each site - those circles fill up fast!) Read carefully - you'll begin to develop opinions that will come in handy for future activities!
Locate Local Credit Unions and find general information about credit unions .
You can find an overview of credit unions .
Find out How Banks Work .
Here is a thorough definition of credit unions.
You can also look at the definition of banks.
When you finish researching all these sites, keep your venn diagram and use it as a reference for the rest of the project.
Activity 2: Where are they?
Find banks and credit unions closest to your home or school using the following sites:
- Locate Local Banks (Enter "banks" in the place for name and enter your zip code)
- Locate Local Credit Unions ; General Credit Union Information
Activity 3: Which one is better for me?
Print the Criteria Worksheet and use your venn diagram and Web sites to evaluate banks and credit unions based on the different criteria listed on the worksheet.
You've looked at some of the traits of banks and credit unions. They are fundamentally the same, right? You've also read about their tax status; banks pay taxes as a “for-profit” organization while credit unions are largely untaxed. What do you think about this? Is it fair? On one hand, it enables credit unions to offer lower fees to its members. On the other hand, it creates an uneven playing field: Banks have to make a much larger profit to cover taxes. My local bank paid almost $2 million in taxes for 2005! What would happen if banks went out of business, losing their customers to credit unions? What would happen if credit unions started being categorized as “for-profit” groups and started paying taxes? Take a couple of thoughtful minutes to think about these scenarios.
Use your venn diagram and the information you learned from your research to complete this categorization activity.
Be prepared to discuss with your classmates what you've learned and how you feel about it. How is the tax status of banks and credit unions different? Is it fair? Who does it benefit? Who does it hurt?
Your teacher may give you the opportunity to interview an employee of a bank or credit union to find out more on the topic. Be thinking of at least five questions you could ask the potential employee you plan on interviewing.