Credit Union vs Bank: Which One is Right for You?
The United States contains just shy of 10,000 banks and credit unions, and they’re all vying for your business. Interestingly, while the number of local credit unions has slightly declined, their total memberships have risen. Why? What are the differences between these financial institutions? Let’s explore the credit union vs bank debate and learn why the appeal of credit unions is growing among consumers.
What is the Difference Between Banks and Credit Unions?
With the rise in credit union memberships, it’s evident that there’s a difference between banks and credit unions, and it’s resonating with consumers. Here are some of the most significant differences:
Membership Requirements
Arguably, the most notable difference between credit unions and banks is their membership requirements.
For most banks, anyone can open an account regardless of their profession or place of residence. They cater to a broad customer base, and (like most companies) their primary goal is to generate profits for shareholders.
On the other hand, credit unions are member-owned cooperatives with more specific membership requirements. To join a credit union, you often need to share a common bond with other members – a similar occupation, geographic location (like our Maine credit union), or affiliation with a particular organization or group. These eligibility criteria help foster community and mutual support among members.
Ownership Structure & Governance
Traditional banks are usually owned by a group of shareholders who invest capital hoping to receive a return on their investment, so banks operate under a board of directors elected by shareholders, with voting power typically proportional to the number of shares held. This structure means that larger shareholders have a more significant influence on the bank’s strategic decisions and are usually focused on maximizing value and profitability.
Credit unions are member-owned organizations, meaning they operate with the goal of serving their members’ best interests. This structure often prioritizes delivering high-quality services and competitive rates rather than maximizing profits. The volunteer board of directors is responsible for ensuring these member-focused values guide the credit union’s operations.
Community Impact
Banks and credit unions both play a significant role in the communities where they operate but their impact can differ substantially. Traditional banks often have a broader geographical reach which can sometimes water down their community interests.
Conversely, credit unions are inherently local and community-focused. As nonprofits, they often funnel more resources into their communities. They are known for offering financial education, supporting local charities, and investing in community development projects.
Products & Services
Banks and credit unions offer remarkably similar financial services, including checking and savings accounts, credit cards, auto loans, personal loans, mortgages, and sometimes investment services as well. They also both provide online and mobile banking options, so whether you’re looking to save, spend, borrow, or invest, you’ll likely find suitable options at either a national bank or a smaller credit union.
What are the Benefits of a Credit Union?
Lower Interest Rates on Loans – As nonprofit institutions, credit unions aim to provide maximum value to their members. Instead of distributing profits to shareholders, they return earnings to members through favorable rates and lower fees on loans of all types.
Higher Savings Rates – For similar reasons, when you become a member of a local credit union, you’ll likely get higher rates on savings accounts, certificates of deposits, and other interest-earning products.
More Personalized Service – Due to their smaller size, credit unions can offer more personalized service to their members, and they have a better grasp of the area’s unique financial circumstances, allowing them to provide financial advice and services that align with each member’s unique goals.
Easy Online Banking – Online banking gives credit union members access to free online and mobile banking services, including fund transfers, bill payments, and check deposits. Some credit unions, like cPort, also offer additional features like access to your credit score and the ability to become a member online.
Support for Small Business Owners – Credit unions can provide more personalized and flexible services for small business owners, including lower fees, better interest rates on business loans and savings accounts, and more favorable loan terms. And with their more profound understanding of the local market, they can also offer valuable advice and support to small businesses in their community.
Become a Member at cPort Credit Union Today
Banks and credit unions both offer valuable financial services but cater to different needs. If you’re ready to enjoy the benefits of being part of a financial institution that truly values your success, consider becoming a member of cPort Credit Union today. We have five physical branch locations and offer a wide range of online services to serve you. We can’t wait to welcome you as a member!