How is a credit union different than a bank? (2024)

FAQs

How is a credit union different than a bank? ›

Banks are typically for-profit entities owned by shareholders who expect to earn dividends. Credit unions, on the other hand, are not-for-profit, member-owned cooperatives that are committed to the financial success of the individuals, families, and communities they serve.

The Bottom Line. Credit unions can be ideal for a low-interest loan, lower mortgage closing costs, or reduced fees, but you'll need to qualify for membership. Larger banks may offer you more choices regarding products, apps, and international or commercial products and services, and anyone can join.

Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network such as Allpoint or MoneyPass.

Credit Unions are not-for-profit and member-focused, meaning we care more about people than profits. Family life, supporting the community, and helping people achieve their financial goals are all goals we foster. Large banks are, by nature, sales-driven and with sales targets come strict quotas.

Unlike banks, credit unions do not have shareholders to be concerned about, which means they can offer lower interest rates on loans and higher interest rates on savings. Credit unions have a reputation for being more personable than other banks.

Some have argued that credit unions are inherently inefficient because of their one-member, one-vote governance structure.

Experts told us that credit unions do fail, like banks (which are also generally safe), but rarely. And deposits up to $250,000 at federally insured credit unions are guaranteed, just as they are at banks.

People choose banks primarily because of the convenience of multiple branches across the country, along with better technology. On the flip side, people choose credit unions primarily because of discounted loan rates, higher interest rates and better customer service.

Generally, credit unions are viewed as safer than banks, although deposits at both types of financial institutions are usually insured at the same dollar amounts. The FDIC insures deposits at most banks, and the NCUA insures deposits at most credit unions.

How do credit unions make money? ›

Any income the credit union generates through interest, fees and loans is then used to fund community projects, reinvest into the organization or provide services that directly benefit members, like paying higher savings interest rates.

Final answer: One drawback of internet-only banks is the limited availability of certain services, such as getting a document notarized. Additionally, some brick and mortar banks may not accept check payments from virtual banks.

Generally, credit unions are viewed as safer than banks, although deposits at both types of financial institutions are usually insured at the same dollar amounts. The FDIC insures deposits at most banks, and the NCUA insures deposits at most credit unions.

Like we hinted at in the last reason, Credit Unions are known to have better and lower loan rates compared to big banks because our profits go right back to our members in the form of great deals. Expect lower interest rates and bigger returns with a Credit Union.

WHAT IS A CREDIT UNION. A credit union is a customer/member owned financial cooperative, democratically controlled by its members, and operated for the purpose of maximizing the economic benefit of its members by providing financial services at competitive and fair rates.