Banks and Credit Unions: What’s the Difference?
Credit Unions
When you need to open a savings or checking account, you can go to your community bank. You can also go to a credit union.
Both offer these services and many more financial products, ranging from credit cards to various loans you might need personally or for your business.
However, what is different between them?
Banks Are For-Profit Organizations
Banks are businesses and companies that exist to create profit for their owners.
That might be for private owners, but it might also be for shareholders in a publicly traded company.
While fees, services, and rates will always be done in ways that are hopefully attractive to clients, the focus is always going to be on generating profit for whoever owns them.
Credit Unions Aren’t For-Profit Establishments
A credit union does focus on its user base. Many credit unions focus on a particular group or demographic, such as military veterans or people within a certain community.
Depending on their location and tax structure, a credit union might be a purely non-profit organization or a not-for-profit organization with very stringent rules about how much money it’s allowed to make.
Different Insurance
Whether you open an account at a bank or a credit union, your account will be insured for up to $250,000 by the federal government.
However, the source of that insurance will change. It’s through the FDIC for banks, and it’s the NCUA for credit unions.
Practical Differences You Should Know About
Banks are far more likely to have more branches you can visit. They’ll also have a bigger network of ATMs you can use.
Furthermore, they’ll offer more financial products, and anyone can do business with them. However, the interest rates on their loans might be higher.
Credit unions might have lower interest rates on their loans. However, they will not have as many ATMs or retail branches as you can visit.
Their lineup of financial services and products will have a narrower range, and there might be eligibility requirements for joining them for an account or service.
For most consumers, credit unions and banks fulfill many of the same necessary roles in personal finance.
However, there are differences between these establishments. Knowing what these differences are can help you decide which one best serves your needs or matches what you’re looking to do business with in life.
Category: Banking
