This makes banks an easier choice for many consumers who lack any specific affiliation with a community served by a credit union, although some credit unions do allow you to become a member simply by paying a nominal membership fee.īanks generally have more branches and ATMs available, as compared to credit unions. This added convenience makes it easier to access your money from a bank, since you may be able to find branches and ATMs throughout your city, state and even nationwide. Credit unions are only open to members, and you may not be eligible for membership if you or a member of your household does not belong to the community served by the credit union. To start, banks are open to any consumer interested in a product or account, provided the consumer doesn’t have a bad banking history. While the fact that credit unions are not-for-profit and member-focused may make them sound like the clear winner compared to banks, there are a number of reasons why consumers may choose banks. Interest rates on lending also tend to be higher at banks, while their APYs on savings products tend to be lower. This is one of the reasons why you will often find that banks charge more fees, and at a higher rate, than credit unions do. This means banks are focused on making that profit, rather than specifically centering on the needs of the account holders. This means members generally get lower rates on loans, pay fewer (and lower) fees and earn higher APYs on savings products than bank customers do.īanks, on the other hand, are in business to make a profit. It is the credit union’s mission to provide its members with the best terms it can afford for their financial products. This means credit unions do not have to worry about making profits for shareholders. In addition, as a nonprofit, credit unions are also generally exempt from federal taxes, and some credit unions even receive subsidies from the organizations that they are affiliated with. Credit unions typically open membership to individuals who share a common bond, such as the industry they are employed in, the community they live in, their faith or their membership in another organization. not-for-profit divide is the reason for the difference between the products and services each type of institution offers.Ī credit union is owned by its members, since the institution is actually set up as a cooperative. Banks are for-profit, meaning they are either privately owned or publicly traded, while credit unions are nonprofit institutions. What makes banks and credit unions different from each other is their profit status. Here’s what you need to know about how banks compare to credit unions, so you can find the best home for your money. Understanding the difference between banks and credit unions can help you make the best decisions for you and your family. An often-overlooked option for these sorts of products is the credit union, which offers many of the same types of financial products and services that you can get at a bank.īut what exactly is a credit union, and how is it different from a traditional bank? Although both banks and credit unions have similar offerings, there are some important distinctions to make between these two types of institutions.
When you are looking for a new checking or savings account, a loan or a line of credit, you have more choices than just the myriad local and national banks that compete for your business.
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