Banks vs Credit Unions What 90 of People Still Don t Know

Banks and credit unions have been around for quite some time, and while they both offer similar services, there are some significant differences between them.

Writer Diane Lorenzo Revealed March 3, 2013, shed some light on the subject, giving people a better understanding of what each institution has to offer. However, it is essential to note that even though these institutions have been around for quite some time, about 90% of people still don’t know the difference between them.

So, what exactly are credit unions and banks, and what services do they offer?

Credit Unions

A credit union is a not-for-profit, member-owned financial cooperative where members pool their money to provide loans and other financial services to one another. Credit unions are operated by their members, who share common bonds, such as working for the same employer, belonging to the same church or community, or living in the same area.

Since credit unions don’t have to pay taxes or make profits for shareholders, they can offer their members better rates on deposits and loans. Members of credit unions also have a say in how the institution is run, as they are part-owners.

Banks

A bank is a financial institution that provides financial services, such as accepting deposits, making loans, and facilitating transactions. Banks are for-profit institutions, which means they aim to make money for their shareholders.

Banks can be divided into two main categories: commercial banks and investment banks. Commercial banks offer services such as checking and savings accounts, loans, and credit cards, whereas investment banks specialize in services like investment management and securities underwriting.

Main Differences Between Banks and Credit Unions

Even though both banks and credit unions offer similar services, there are some significant differences between them. Here are some of the main differences:

1. Ownership: Credit unions are owned by their members, whereas banks are owned by shareholders.

2. Profit motive: Banks aim to make profits for their shareholders, whereas credit unions aim to provide services to their members at a lower cost.

3. Membership: Credit unions require members to share a common bond, whereas banks do not have such requirements.

4. Governance: Credit unions are governed by their members, who elect a board of directors to make decisions on their behalf. Banks, on the other hand, are governed by a board of directors who are elected by shareholders.

5. Rates and fees: Credit unions often offer better rates on deposits and loans compared to banks. Credit unions also have lower fees compared to banks.

6. Customer service: Credit unions are known for their personalized customer service, as they are part of the community. Banks, on the other hand, often have a more impersonal approach to customer service.

7. Branch and ATM network: Banks have a more extensive network of branches and ATMs compared to credit unions.

8. Product offerings: Banks offer a wider variety of financial products compared to credit unions. However, credit unions often offer more specialized products that cater to their members’ needs.

9. Online banking: Banks often have more advanced online banking services compared to credit unions.

10. Security: Both banks and credit unions offer secure services; however, banks often have more advanced security measures in place.

Which One is Better?

Whether a bank or credit union is better depends on individual needs and preferences. If you value personalized customer service, better rates, and lower fees, a credit union might be the better choice. However, if you prefer a wider variety of financial products, a more extensive network of branches and ATMs, and more advanced online banking services, a bank might be the better choice.

It’s essential to note that credit unions and banks are both safe places to keep your money. They both offer insured deposits and have measures in place to prevent things like identity theft and other forms of financial fraud.