We know when it comes to managing your finances you have various options, including banks and credit unions. As you consider what works best for you and the financial goals you’ve set, we thought it would be helpful to outline the major differences between a bank and a credit union so you can make an informed choice based on your specific needs. Credit unions and banks differ in the following categories.
First and foremost banks and credit unions are structured differently especially as it relates to ownership.
Banks: Banks are for-profit institutions owned by shareholders, who may or may not be customers of the bank. The primary goal of a bank is to generate profits for its shareholders by offering a wide range of financial services, including savings and checking accounts, loans, credit cards, and investments.
Credit Unions: Credit unions are not-for-profit organizations owned by their members, who are also their customers. Members usually share a common bond, such as being employees of the same company or residents of the same community. Credit unions exist to provide affordable financial services to their members and typically offer similar services to banks, such as savings and checking accounts, loans, and credit cards.
Banks: Banks are open to the general public and have no specific membership requirements. Anyone can open an account with a bank, regardless of their location, profession, or affiliations.
Credit Unions: Credit unions have membership requirements based on a common bond. This bond could be geographic (members from a specific community), employment-related (employees of a certain company), or based on another qualifying factor. For example, at the Mount Olive Baptist Church Federal Credit Union we require that you are a member of Mount Olive.
Banks: While banks prioritize profits, they also focus on delivering a wide array of financial products and services to a broad customer base. Customer service levels can vary, and some banks may prioritize profit-driven decisions over individual customer needs.
Credit Unions: Credit unions are known for their member-centric approach. Since members are also owners, credit unions are often more community-oriented and strive to offer personalized services that cater to the specific needs of their members. Decision-making tends to be more localized and focused on the well-being of the members.
Banks: Banks may offer a wide range of financial products, but they often have higher fees and interest rates compared to credit unions. Profit generation is a significant factor influencing the fees charged and the interest rates offered by banks.
Credit Unions: Credit unions typically offer lower fees and competitive interest rates on loans and savings accounts. Because credit unions are not-for-profit organizations, they can focus on providing better deals to their members rather than maximizing profits.
Banks: Banks generally have a larger physical presence with numerous branches and ATMs, making them convenient for customers who prefer face-to-face interactions and widespread access to ATMs.
Credit Unions: While credit unions might have fewer branches and ATMs compared to banks, they often belong to a shared network, allowing members to use a wider range of ATMs without incurring additional fees. Online banking services are becoming more prevalent in credit unions, offering members greater convenience.
Choosing between a bank and a credit union depends on your financial preferences, goals, and values. Banks offer a wide array of services and accessibility, while credit unions prioritize personalized services and community involvement. Carefully consider the ownership structure, membership requirements, customer service, fees, and interest rates of both options to determine which institution aligns better with your financial needs and priorities.
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