The Basic Differences Between Banks and Credit Unions
Credit unions and banks may, at first glance, seem to be quite similar. Both types of financial institutions let you open checking and savings...
4 min read
Chris Gottschalk : Dec 21, 2023 4:45:00 AM
Ever since I started working at a credit union, I’ve been surprised at how and where financial lessons turn up. When you write about finances for a living, you tend to find financial lessons in pretty much everything, from Universal monster movies to Netflix miniseries. Truth be told, I was actually hoping to come up with some financial lessons from the movie “It’s a Wonderful Life.”
When I watched the movie this year, though, two aspects of the movie stood out to me more than the others.
We all know the story of It’s a Wonderful Life, and how George Bailey grows up to eventually run the building and loan in the town of Bedford Falls. (If you haven’t seen the movie, go ahead and watch it. We’ll wait for you.) Even if you’ve seen the movie 50 times, you might not have realized what exactly a building and loan, is.
According to Wikipedia, a savings and loan is more popularly known as a savings and loan association. Regardless of what you call it, it's a financial institution that specializes in accepting savings deposits and making loans, especially mortgages. Savings and Loans are also often mutually held, which means that the people who have accounts with the institution are members with voting rights.
Sound familiar?
Now, a savings and loan isn’t exactly a credit union. A credit union is a not-for-profit financial cooperative, for instance, while a building and loans are for-profit.
The big difference between credit unions and savings and loans, though, is that building and loan associations are focused strongly on residential mortgages by law. They need to invest at least 65% of their assets in residential mortgages.
Despite the fact that credit unions are not-for-profit and savings and loans are for-profit, the two have a lot of similarities. A savings and loan association can be mutually held, with the leadership determined by the people who have deposits and loans with the institution. Credit unions also have their members vote on their leadership, but take it one step further--members are actually the owners of their credit unions.
Another connection between savings and loan associations and credit unions is that the purpose of a savings and loan is to encourage people to save or make investments, even if they're not rich. To quote George Bailey's dad:
“I feel that in a small way we are doing something important: satisfying a fundamental urge. It’s deep in the race for a man to want his own roof and walls and fireplace, and we’re helping him get these things in our shabby little office.”
While credit unions might not be as focused on making mortgages as building and loan associations, the overall goal is still the same.
All this leads to the one moment that really stood out to me as I watched the movie last night, and the movie got to the scene where George is trying to avert a run on his building and loan as the Great Depression is in full swing. When George tries to convince the members of the Savings and Loan not to withdraw their money from the institution, he tells them where their money really is:
“You’re thinking of this place all wrong. As if I had the money back in a safe. The money’s not here. Your money’s in Joe’s house, right next to yours. And in the Kennedy house, and Mrs. Macklin’s house, and a hundred others. You’re lending them the money to build, and they’re going to pay it back to you as best they can.”
As per usual, Jimmy Stewart managed to sum up an important concept better than almost anyone else.
That speech pretty much illustrates why credit unions exist, and especially why First Alliance Credit Union exists. The firefighters and schoolteacher who formed First Alliance weren’t doing it to get rich, they were doing it to provide financial services to people who needed it.
Even now, 90 years later, this is still the goal of First Alliance Credit Union. Our members are the most important part of our credit union, and all that the employees do is for every one of our members. We want our community to succeed, from Lake City to Stewartville, and it’s why we try to offer services that make your life easier, from the Advisor Supported Kiosks to our partnerships with companies like Greenlight.
We also want everyone to have a chance to succeed, which is why we have the “No judgment, just guidance” lending model. If your credit score has a few dings in it, we want to look beyond your credit score to understand your financial situation and how getting a loan could help you. Even if we can’t approve the loan, we can help you figure out what steps you should take to improve your finances and get approved the next time you apply for a loan.
The bottom line? We use the assets that we have at First Alliance Credit Union to help our members. When you bank with us, you know your money is getting put towards the good of the community.
It’s hard not to feel good about that, especially in an age where prices seem to get higher every day, and it seems like landlords are trying to get as much as they can for their apartments and rental houses. At the very least, all of us at First Alliance Credit Union are working to try to make life better for our members.
The next time you watch “It’s a Wonderful Life,” take a few minutes to listen to what George Bailey has to say about the people who do the living, working and dying in Bedford Falls. It’s worth going to work every day to try to help the people who work in Olmsted, Dodge, Goodhue, Wabasha and Winona reach their financial goals.
If you’re already a member of First Alliance Credit Union, thank you for putting your trust in us. If you’re not a member, swing by one of our locations sometime or browse our website to see what we can do for you.
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