How Credit Unions Are Different from Banks
When choosing a financial institution, it's important to weigh the pros and cons of banks versus credit unions. While both offer similar services — such as checking and savings accounts, loans, and credit cards — the fundamental differences between these two types of institutions are significant. These differences not only affect their operations but also provide a valid reason for why credit unions should not be taxed the same way as banks.
For-Profit vs. Nonprofit
The primary difference between banks and credit unions is their profit status. Banks are for-profit institutions, either privately owned or publicly traded, and their main goal is to generate profits for shareholders. This profit-driven model often leads to higher fees and interest rates for customers as banks strive to maximize their earnings.
In contrast, credit unions are nonprofit organizations owned by their members. This cooperative structure means that any profits made by a credit union are returned to its members in the form of lower fees, better interest rates, and improved services. Credit unions are designed to serve their members rather than to make a profit, aligning their interests directly with those of the community.
Community Support and Engagement
Credit unions have a strong connection to their communities, providing financial education, supporting local businesses, and engaging in charitable activities. A notable example of this community support is the Credit Unions for Kids program, a collaborative initiative among credit unions in Montana. Last year, this program raised over $30,000 to benefit Shodair Children’s Hospital, the only Children’s Miracle Network Hospital in Montana.
Credit Unions for Kids embodies the credit union philosophy of "people helping people." Through various fundraising events, including the Brawl of the Wild football rivalry and Miracle Jeans Day, Montana credit unions unite to make a meaningful impact on the lives of children and families across the state.
This level of community involvement highlights the dedication of credit unions to the well-being of their members and the communities they serve.
The Importance of Preserving the Credit Union Tax Status
If credit unions in Montana were subjected to the same tax treatment as banks, it would have serious repercussions for their operations and the communities they serve. Currently, credit unions enjoy tax-exempt status thanks to their nonprofit, member-owned structure. This exemption enables them to offer lower fees, more favorable interest rates on savings accounts, and more affordable loan options compared to traditional banks. Eliminating this tax exemption would likely escalate their operating costs, which would result in higher fees and interest rates for members. Their commitment to serving members and supporting communities, as demonstrated by initiatives like Credit Unions for Kids, emphasizes the need for different tax treatment. By recognizing and preserving these distinctions, we can ensure that credit unions continue to thrive and contribute positively to our communities.