Before you decide on where to do your banking, it’s important to understand the differences between a Bank and Credit union. Both types of financial institutions typically offer many of the same products and services — however, each uses a different business model. If you want to learn about both banks and credit unions so you can choose between them, here are a few ways these institutions differ.
Credit unions are not-for-profit organizations that are owned and controlled by individuals, or members, who use their services. You can join a credit union online, but eligibility is usually based on your employer, family member affiliation or geographic location. An initial membership deposit makes an individual a part-owner of the credit union and gives him or her a say in its decisions.
Additionally, credit unions operate to promote the well-being of their members. Profits made by the organization are returned to members in the form of lower interest rates for loans, reduced fees and higher interest rates for savings. Credit unions also are known for excelling at customer service due to their nonprofit status.
Banks, on the other hand, are for-profit financial institutions that are owned and operated by shareholders. They typically pay less interest but may offer more convenience regarding online banking, ATMs, locations and mobile access. Banks also may offer rewards programs. Unlike credit unions, banks are free to conduct business with any customer and no membership is required. Commercial banks, especially large ones, tend to offer a wider range of consumer products and services than credit unions, such as stock investing, retirement funds and financial planning services.
Taking these factors into consideration can help you decide which type of financial institution bettween a Bank and Credit union can best serve your needs. For more information on the fundamental differences between credit unions and banks, see the accompanying infographic.
Author bio: Vice President of Marketing Kristin Dove has over 28 years of marketing experience with Pacific Service Credit Union. Dove provides credibility in the ever-changing world of marketing. She has a B.A. in Information and Communication Studies from California State University, Chico, has won numerous awards for her work, and served on many industry councils.