The Differences Between Credit Unions and Banks: Everything You Need to Know
I’ve been getting many questions about alternatives to banks due to the surge of news and social media posts around recent bank failures (of SVB and Signature).
As many of you know, I’m a big supporter of community banks and an advocate for credit unions. In today’s article, I’d like to share the differences between Big Banks and credit unions.
Differences between Big Banks and Credit Unions You Need to Know
Credit unions and banks are both financial institutions that provide a range of financial products and services to their customers. However, there are several key differences between credit unions and banks:
- Ownership: Credit unions are owned by their members, who are also their customers. When you open an account with a credit union, you become a member and part-owner of the institution. Banks, on the other hand, are owned by shareholders who may or may not be customers of the bank.
- Non-profit status: Credit unions are not-for-profit institutions, which means they are focused on providing services to their members rather than maximizing profits for shareholders. Any profits that credit unions do make are typically reinvested in the institution or returned to members in the form of lower fees, higher interest rates, or better services. Banks, on the other hand, are for-profit institutions that are primarily focused on maximizing shareholder returns.
- Membership requirements: Credit unions have membership requirements, which can vary depending on the institution. Some credit unions are open to anyone who lives or works in a certain geographic area, while others are affiliated with a particular employer, industry, or religious group. Banks have no membership requirements. Learn how to join a credit union here.
- Rates and fees: Credit unions often offer lower interest rates on loans and higher interest rates on savings accounts than banks. They may also have lower fees for various services, such as overdraft protection or ATM usage. Banks, on the other hand, tend to have higher fees and lower interest rates.
- Size and accessibility: Credit unions are typically smaller than banks and may have fewer branches and ATMs. However, many credit unions are part of larger networks that allow members to access their accounts and services at other credit unions across the country. Banks, on the other hand, tend to have more branches and ATMs, but may not offer the same level of personalized service as credit unions.
Overall, credit unions and banks have some similarities, but the differences in ownership, non-profit status, membership requirements, rates and fees, and accessibility can make credit unions a better choice for some consumers.
Want to learn more? Read the following articles (and feel free to share within your network).
Hi, I’m Jason, author of Happy Money Happy Life: A Multidimensional Approach to Health, Wealth and Financial Wellbeing. It’s a book on happiness that happens to talk about money. In the book, I share the eight wellness dimensions and how you can use money as a tool to live a healthier, wealthier, and happier life.
In 2023, I’m embarking on a 50-state journey to turn local money discussions into a national conversation on financial wellbeing. I’m working with credit unions and independent booksellers to talk money, wellness, and happiness. Learn more: www.phroogal.com/cuhappy