Credit Unions vs. Banks: What’s the Difference?

By design, credit unions are different than banks. We break it down for you here.

Banks and credit unions are similar in many ways. Both accept deposits, offer loans and other financial services, and are secure places to keep funds. But there are significant differences between the two. If you’re considering joining a local credit union, join us and find out how credit unions work.

For-Profit vs. Not-for-Profit 

One of the most significant differences between banks and credit unions is that credit unions are cooperative financial institutions owned by their members and operate as a not-for-profit status. Banks are for-profit businesses owned by stockholders. Profits at credit unions are returned to members through better rates, lower fees, and other benefits. Only stockholders will receive profits at banks. Credit unions are democratic organizations owned and controlled by their members. Every member has one vote and an equal opportunity to participate in the decision and policymaking. 

Credit Union Member vs. Bank Account Customer

At a credit union, you’ll always be more than just an account number; you’ll be a valued partner. Credit unions put a focus on the members they serve every day. That’s just the way it is and always will be.

Credit Unions Report to Members Not Stockholders

Members, not stockholders, own a credit union. Every credit union member has equal ownership, regardless of how big their account is. Credit union members elect the board of directors that help manage the credit union. Credit unions will determine bylaws, terms of office, and voting requirements. Banks must focus on making higher profits that are returned only to stockholders, not customers. Stockholders do not need to be customers of the bank they hold stock in. Account-holders at banks have no say in how the bank operates or any voting rights.

Benefits of a Credit Union for Members 

As a credit union member, you have privileges banks can’t offer. 

• Profits rolled back into credit unions allow for lower loan rates.
• There is a greater focus on the local community.
• Voting rights allow members to vote on bylaw changes, mergers, charter changes, board elections, and other matters.
• Credit unions rely on members to help form and make decisions for their branches.

Credit Unions Serve a Specific Population

Unlike banks, credit unions can serve a specific population, interest, or group. Some have requirements to join; others are open to membership. There are credit unions for active military, Veterans, actors, postal workers, airline employees, specific ethnic groups, and more. With over 5000 different credit unions, there’s sure to be one that fits your needs, work, and background. 

Personalized Service

Credit unions are well known for their excellent customer service. As a not-for-profit, credit unions can focus energy and training on high-quality customer service. Credit unions don’t sell members the latest financial product because of a sales quota. A credit union’s products and services are tailored to the member, not a corporate quota.

Better Rates and Lower Fees 

Credit unions serve members over stockholders. The number one motive for banks is to increase stockholders’ profits. The goal of credit unions is to return profits to their members through lower interest rates and fees, financial education, and community support. 

FDIC vs. NCUA

The Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA) insure your deposits. The only difference is that NCUA insures credit union deposits, and FDIC only issues bank deposits. Credit unions and banks both insure for the same amount, $250,000. If a credit union should fail, the NCUA will pay the member a maximum amount. NCUA and FDIC are federal agencies. 

In addition, there is the National Credit Union Share Insurance Fund). NCUSIF was created by Congress in 1970 and insures members’ deposits in federally chartered credit unions. Federally chartered credit unions will have “Federal” in their name. Rest assured all credit unions are insured, and your funds are safe. 

Branch/ATM locations – Share Network

Back in the day, a credit union member may have found it difficult to make transactions outside their local credit union. But that isn't the case today.  Credit unions offer what's called "shared branching."  Shared branching is a national network of credit unions from across the country that share their facilities to give all of their members thousands of convenient locations to perform financial transcations.  There are more than 5,600 shared branches across 50 states and you'll have access to over 30,000 Surcharge-Free ATMs across the U.S. 

Local Community Involvement 

Every year, credit unions across the country provide funds, support, and goods to local communities and charities. Every credit union is different as to the organization and support they provide, but all credit unions are committed to the communities they serve.