@w20031424 wrote:1. Why Credit Union tend to give customers higher CL ??
2. Why these big banks give so low interest rate of CD or Saving compared with Credit Union?
Thanks.
1) This isn't always the case; there are some which traditionally do (NFCU being the most glaring example, and a few others) but across the board I'm not certain you'll see that. Also with the exception of NFCU, I suspect many large limits come in the +1-3K range, which is a shock and awe number to someone like me, but in the grand scheme of things not a fantastic additional amount of exposure over limited membership. If I had to guess there's a bunch of consumer psychology that goes on too in terms of customer use of a CU, which dovetails into the second question.
2) Financial institutions are limited by their assets, and CU's specifically by the assets of their shareholders. The more funds deposited into a CU, the more loans of various types they can make to the rest of their members. No deposits, no loans, no existence for the CU. National lenders tend to be far more diversified in terms of their assets, though it does hold true: banks run promotions on both checking, savings, CD's, and similar when they need more money for their financial reserve.
I pulled these excerpts from the Wikipedia page on credit unions. (For two reasons, one: I wanted to double check my facts first and two: I thought it explained better than I could). I bolded the parts pertaining to your questions.
Legally, and for tax purposes, credit unions in the US are considered to non-profit. Banks assert that since this status exempts credit unions from many federal and state taxes, credit unions can provide more competitive products.
Credit unions differ from banks and other financial institutions in that the members who have accounts in the credit union are the owners of the credit unionand they elect their board of directors in a democratic one-person-one-vote system regardless of the amount of money invested in the credit union
In the credit union context, "not-for-profit" should not be confused with "non-profit" charities or similar organizations. Credit unions are "not-for-profit" because they operate to serve their members rather than to maximize profits.But unlike non-profit organizations, credit unions do not rely on donations, and are financial institutions that must turn what is, in economic terms, a small profit (i.e. "surplus") to be able to continue to serve their members. According to the World Council of Credit Unions (WOCCU), a credit union's revenues (from loans and investments) need to exceed its operating expenses and dividends (interest paid on deposits) in order to maintain capital and solvency and "credit unions use excess earnings to offer members more affordable loans, a higher return on savings, lower fees or new products and services".
