Credit unions, taxes, and dishonest bankers

first_img 9SHARESShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblr by: Ryan EllisSeemingly out of the blue, there was a raft this month of op-eds bashing credit unions. Alex Sanchez, CEO of the Florida Bankers’ Association, accused credit unions of being unpatriotic by not paying taxes. Frank Keating, the president and CEO of the American Bankers Association, said that if dropping non-profit status was good for the National Football League, it should be good for credit unions.What Is a Credit Union and How Do They Pay Taxes?Credit unions are treated under the Internal Revenue Code as a not-for-profit entity. While that means that they do not face taxation at the entity level (as most–but not all–banks do), it does mean they are obligated to plow their earnings right back into their customers’ (“members’”) pockets. How does that work?Suppose you have a savings account at a credit union. The interest you earn on that savings is higher than an equivalent account you earn at a bank. That’s because the credit union has to give any profits back to their members, and in this case that means a higher interest rate on deposits.Let’s take the other end of the spectrum. You have a mortgage from a credit union. The interest you pay on that loan is lower than an equivalent mortgage you could obtain from a bank. That’s because the credit union has to give any profits back to their members, and in this case that means a lower mortgage interest rate. continue reading »last_img

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