We all know credit unions and banks are financial institutions, but which one is right for you? Here’s a breakdown of what you need to know to decide where to grow your financial life.
The biggest difference when comparing credit unions and banks is that credit unions are a not-for-profit organization owned by its members who benefit from the credit union’s profits and governed by a board of directors. Banks are for-profit businesses run by shareholders who benefit from the bank’s profits.
But what does this mean for you?
Quite simply: Membership to a credit union means each member is an owner of the credit union and holds a share of the organization.
Credit unions offer the same robust financial services that banks offer, but they often offer these services at a higher return with lower fees than banks. This is because credit unions pour profits back to its members through dividends, better rates, technological improvements or other services. Credit union profits are aimed to improve and increase the value of the credit union to its members.
Side-by-side comparison: Credit unions versus banks
- Credit unions are smaller, community-focused.
- Banks are often larger, nationally-focused.
- Credit unions are owned by its members, and they pass profits to them.
- Banks answer to stockholders, and they divide profits among them.
- Credit unions usually offer lower interest rates.
- Banks typically offer higher interest rates and transaction fees.
Both banks and credit unions are federally insured by a US government agency.
- Banks are insured by Federal Deposit Insurance Corporation (FDIC) – the standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category.
- Credit unions are insured by the National Credit Union Association (NCUA) – the standard share insurance amount is $250,000 per share owner, per insured credit union, for each account ownership category.