What’s the Difference Between a Credit Union and a Bank?
Credit unions run in a way that benefits their members directly. It all starts with the fact that credit unions are owned by their members (that’s you!) Credit unions’ Board of Directors are all volunteers and members. Shares don’t determine how much voting power you have at a credit union, either. Every member carries one vote. Understanding the differences between credit unions and banks can help you make an informed choice based on your financial needs and goals.
Credit Unions are Owned By You (the members)
One of the main differences between credit unions and banks is who owns them. Banks are typically for-profit entities owned by shareholders who expect to earn dividends. Credit unions, conversely, are not-for-profit, member-owned cooperatives committed to the financial success of the individuals, families, and communities they serve. This cooperative structure means that credit union members are also owners who have a say in how the credit union operates. Any profits generated are reinvested into the credit union or returned to the members through lower fees or better interest rates.
Credit Unions Have Membership Requirements
While banks are open to the general public, credit unions have membership requirements that help them provide personalized, community-oriented financial services. To join a credit union, you usually need to meet certain eligibility criteria, such as living or working in a specific geographical area, belonging to a certain profession or organization, or being a family member of an existing member. These membership requirements help the credit union foster community among members, maintain ownership and control, manage risk, offer tailored services, and ensure financial stability.
Credit Unions Offer Personalized Service
Credit unions focus on member satisfaction. As member-owned organizations, they prioritize their members’ needs and provide more personalized service. Credit unions often offer highly competitive interest rates on loans and savings accounts and more flexible lending criteria. They may also offer financial education and counseling services to assist their members in making sound financial decisions. While credit unions may have fewer branches, many offer 24/7 Digital and Mobile Banking and are part of a larger CO-OP network of branches and ATMs that allow you to bank nationwide.
Credit Unions Offer Competitive Products
Both credit unions and banks offer a range of financial products and services, including checking accounts, savings accounts, loans, mortgages, and credit cards. However, there can be variations in the specific offerings and terms. Due to their not-for-profit status, credit unions often provide lower fees and competitive interest rates on loans and credit cards.
Credit Unions are Regulated by the NCUA
Different entities regulate credit unions and banks. Banks are typically regulated by federal agencies such as the Office of the Comptroller of the Currency (OCC), the Federal Reserve, or the Federal Deposit Insurance Corporation (FDIC). Credit unions are regulated by the National Credit Union Administration (NCUA), a federal agency that supervises and insures credit unions. The NCUA provides similar deposit insurance to the FDIC, ensuring members’ deposits are protected up to a certain limit. This helps ensure that members’ money is safe.
The credit union motto is “People Helping People,” and it’s no wonder. Our savings cycle example illustrates how credit union members benefit from borrowing money from one another.
