Credit unions seem just like banks, but there are a few differences.
A major difference (and a criticism that banks regularly raise) is that credit unions don't pay taxes -- they're not-for-profit organizations. Why do they qualify for this treatment?
The Financial Brand discusses credit unions' tax-exempt status in a recent posting. If you're curious, you can find out why credit unions get a tax break. You'll even learn about a few misconceptions, such as the claim that credit unions get a tax break because they're "member owned."
The takeaway seems to be that credit unions have an advantage because they contribute to society in ways that Congress wants to encourage. The tax code is not just about taking your money, it's also designed to promote and discourage certain types of behavior.
Further reading:
This is somewhat untrue. You say that credit unions do not pay taxes but they do. They don’t pay federal taxes but do pay payroll, property, and sales taxes as well as various licensing fees. By law, credit unions are exempt from paying income tax because all monies earned after operating expenses are returned to members in the form of lower rates on loans and higher rates on deposits.
Brandon is incorrect! Saying that Credit Unions pay higher rates and deposits and lower rates on loans is like saying the tree is shorter. Shorter than what? Paying more or less than whom? They are exempt from income taxes that would go directly to things like education. So a few with a perceived benefit a well marketed lie cause the rest of us to fork out in higher income taxes to cover the nation and state budgets.