- Francesca Sacco
Key Differences Between Credit Unions and Banks
If you’ve never been a member of a credit union before, you might have questions about how these financial institutions differ from traditional banks and whether or not they offer the same services as for-profit banks.
While many of the services and products offered by credit unions and banks are similar, there can be significant differences between these two institutions — and if you aren’t aware of these distinctions, it can end up costing you money.
Here, we compare credit unions versus banks and look at a few key differences between them.
Ownership vs. Membership
One fundamental difference between credit unions versus banks concerns the makeup of ownership. With a traditional bank, there’s an owner of that organization looking to turn a profit off of the bank’s operations, and the bank is ultimately focused on protecting its bottom line.
In credit unions, though, members are the owners. When you open an account, you become a member and have voting rights to determine leadership of the organization. Earnings are also reinvested into the institution rather than funneled up to executives and owners. Years ago, it was necessary to work for a particular company to open an account with a credit union, but today almost anyone can open an account in their local community.
Interest Rates, Fees and Revenue Generation
Because the institution is focused on providing quality service and financial resources to its members, credit unions typically offer lower interest rates and fewer fees on loans and other forms of credit. This is because the organization isn’t focused on maximizing profits, but rather on providing excellent resources for its members.
Similarly, savings accounts and other funds may offer better interest rates than what traditional banks offer. Overall, these financial benefits make it possible to generate more revenue — and save you money on frustrating fees — when you open these accounts through a credit union rather than a bank.
An Established Local Presence
Credit unions are typically local organizations with an investment in the local community. The ebb and flow of the local economy directly impacts credit unions, and this investment can make them a better financial partner for both individual members and local small businesses.
When applying for certain types of small-business loans, the local expertise of your credit union might also improve their ability to connect you to the right loan and provide you with support that sets up success in the face of specific local market challenges you may face. Through this superior understanding of the market issues faced, a credit union lender can become a better partner in your effort to build and sustain your small business.
Thanks in part to their superior local presence, many credit unions offer a personalized approach to service that surpasses the offerings of traditional banks — especially large financial institutions with a national footprint.
This personalized service can yield a wide range of benefits, from connecting you to the right financial products to banking with confidence that the organization is invested in your success.
Digital Service Offerings
In the past, one difference between traditional banks and many credit unions was the gap in their online and mobile banking services. While traditional banks were early adopters of mobile banking, online bill pay, mobile check deposit and other digital services, many credit unions historically lagged behind.
In recent years, however, the gap in these service offerings has closed. Today’s credit unions have the technology infrastructure to match the mobile banking services offered by traditional banks. Online and mobile banking, digital wallets, eStatements, mobile check deposit and text banking are just some of the digital banking services offered by today’s credit unions.
As a result, today’s credit union customers enjoy many of the same innovative services that might have previously drawn them to traditional banks while still receiving the services and personalization that made credit unions great in the past.
Start reaping the benefits of doing your banking at a credit union. Open a checking account today.