Now that you know what a credit union is and how they operate, let’s explore how credit unions and banks differ.
Banks: Banks are for-profit organizations owned and run by shareholders. The main goal of banks is to maximize profits for their shareholders.
Credit Unions: Credit unions are not-for-profit and are owned by their members.The primary goal of credit unions is to promote the financial welfare of their members and to return profits to them.
Banks: Anyone is eligible to open an account with a bank including individuals or companies.
Credit Unions: You must be eligible to become a member. Some credit unions are very restrictive about who can join, while others are open to anyone willing to pay a membership fee.
Products and Services
Banks: Banks offer both personal and commercial banking products, including business credit cards and business loans. Banks may offer investment and saving accounts like individual retirement accounts (IRAs), certificates of deposit, and money marketing accounts.
Credit Unions: Credit unions tend to offer fewer products than banks, especially when it comes to commercial banking products, like commercial loans. Credit unions also typically offer fewer investment products limited to checking and savings accounts and credit cards.
Rates and Fees
Banks: Banks typically have higher interest rates on loans and lower interest rates on deposit and savings accounts. Traditional banks also tend to have more and higher fees on accounts and services than credit unions.
Credit Unions: Credit unions typically offer low or no-fee checking and savings accounts and services. And they tend to have the lowest interest rates on loans. As for interest rates on savings products, you’re likely to find that credit unions offer higher rates than banks.
Banks: Banks are insured by the Federal Deposit Insurance Corporation (FDIC), which provides deposit insurance for up to $250,000 per depositor, per account.
Credit Unions: Credit unions are insured by the National Credit Union Administration (NCUA). Like FDIC insurance, NCUA insurance guarantees up to $250,000 per person, per account.