How to Choose Between a Bank and a Credit Union

Even if you have seen a credit union in your city, you may not have thought about what it is. Credit unions are financial institutions just like banks, but with some key differences in how they operate. Here’s what you need to know about the main differences between credit unions and banks and how to decide which institution is right for you.

How is a credit union different from a bank?

For the most part, banks and credit unions operate in the same way: both institutions accept deposits, make loans, and provide a wide range of financial services.

However, what sets them apart is their profit model. Banks are commercial and credit unions are non-profit organizations owned by their members. This means that when you open an account and deposit money into the bank, you become a customer. When you open an account with a credit union, you become a member of a financial cooperative. As with a bank, you must meet certain requirements to join a credit union, which will vary depending on how the credit union is set up.

Choice between banks and credit unions

When you are considering opening an account with a bank rather than a credit union, it is important to determine what you are looking for in a financial institution.

  • Interest Rates: Credit unions typically offer higher interest rates on savings and loans, largely because they don’t have the same need to make a profit as banks.
  • Convenience: Banks tend to have more branches, ATMs and better mobile apps than smaller local credit unions.
  • Customer Service: Member-owned credit unions are known for offering a more personalized experience compared to large banks.

bottom line

Both banks and credit unions also provide equal security for your money through insurance backed by the federal government. Due to their varying profit status, credit unions tend to offer a more personalized experience, but without all the amenities that come with big banks. When choosing between banks and credit unions, consider which compromises matter most to you.


Leave a Reply