Comparing Banks and Credit Unions:

Weighing your options

In today’s financial world, the wide variety of banking options available to consumers has made managing your finances more straightforward than ever before. For most people, it comes down to a basic, but difficult, decision: do I want to keep my money in a bank, or become a member of a credit union?

Although they offer many of the same services, such as checking accounts, savings accounts, and many loan options, there are significant differences between banks and credit unions.

Before you make your next decision on which financial institution to join, it is important to understand the differences between these organizations, weigh the pros and cons of each, and figure out which institution’s services will put you in the best position to achieve your financial goals.

Member Owned vs. Shareholder Owned

The biggest difference between credit unions and banks comes in their different frameworks for ownership, and how they are governed. Banks tend to be owned by shareholders and investors, with management answerable to these external stakeholders.

Credit unions, on the other hand, operate as not-for-profit organizations, owned and operated by members, and built upon the idea of ‘people helping people’. The primary objective of credit unions is to offer community members an affordable and reliable financial services package. The interests of the community are championed,

and there are no external shareholders that must be appeased with returns on their investments.

Credit unions are run by a democratically-elected board of directors, all of whom are members of the credit union. This approach to corporate governance ensures the goals and objectives of the credit union’s leaders never stray from the needs of members.

Joining Credit Unions

Sticking with the interests of members, the membership requirements at banks and credit unions can also vary quite a bit, marking another noticeable difference between the two financial institution models.

Normally, banks are open to anyone who wishes to avail of their services, no matter where they live or their current employment status. Credit unions, however, will usually have a set of membership requirements that must be met before someone can become a member. Usually, these requirements will include geographical proximity, working for a particular employer, or belonging to a specific organization.

Having to meet specific measures can make credit unions seem less accessible, but this approach leads to a credit union having a strong community of members, linked in some way, who share common values or interests.

The ‘open-door policy’ of banks often lets them offer a wider range of services to customers. But, this leniency is not applied to account requirements, with banks often operating much stricter concerning minimum balances and additional costs.

The Bottom Line

Of course, we can’t speak about the difference between credit unions and banks without talking about costs, rates, and fees. As not-for-profit establishments, credit unions usually charge lower fees and offer higher interest rates for savings and checking accounts.

Meanwhile, banks charge higher fees and offer less lucrative rates to customers, but their range of services is often broader than competing credit unions.

For people who want to minimize transaction costs and increase their earnings on deposits, credit unions are a better option. Credit unions also tend to offer low-cost services for overdrafts, ATM use, and account maintenance. Even with the availability

of more services, when it comes to financial benefits, credit unions hold the advantage.

Customer Service

Credit unions are well known for providing some of the best, tailored customer service in the financial industry. Add to this the community-focused approach to banking they employ, and it will not come as any surprise to learn that credit union members are some of the most satisfied customers around.

The size of credit unions helps them provide extremely high levels of personalized service. With fewer members to worry about – and a shared goal of community development – credit unions give their members outstanding support.

Contrastingly, banks can offer their customers a wider range of services thanks to their deeper pools of resources. Some banks become so large that they struggle to offer the same personalized service that credit unions offer.

When it comes to customer service in the financial services industry, it’s a matter of quality over quantity.

Security Features

You will be glad to hear that credit unions and banks are both subject to strict regulations about putting security measures in place to protect your savings. Banks are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 in insurance per depositor. Credit unions, on the other hand, are fully insured by the National Credit Union Administration (NCUA) and Member and Creditor Insurance Schemes (MCIS).

As well as insurance, all good banks and credit unions will have implemented cybersecurity measures to protect users who bank online. The best credit unions have been developing their online banking services as they challenge banks in the digital space, too.

Join Quincy Credit Union Today

So there you have it. Clearly, credit unions and banks have a lot in common, but they are defined by their differences more than anything else. Being able to accurately calculate the differences between these two options will help you choose the right financial partner for you.

Each has its benefits: credit unions are member-owned, member-run, not-for-profits that reinvest any benefits back into the establishment to address their members’ financial needs; while banks serve more customers and generate great profit for shareholders.

Now that you’ve seen what credit unions have to offer, you’re ready to make the switch. Join Quincy Credit Union today and take the first step on your path to financial freedom.