People often use the words credit union and bank interchangeably, so it can be difficult to know which is which. Those searching for a loan or a new savings account may ask what’s the difference between a credit union and a bank or why they should choose one over the other. When it comes to your current and future financial needs, understanding what each of these financial organizations provides is key to making the best decisions for your finances. Below, we explore the difference between a credit union and a bank and what benefits credit unions provide to members.
What is a Credit Union?
A major difference between a credit union and a bank is that a credit union is a nonprofit organization owned by its members. Instead of seeking to earn a profit, credit unions serve their members only. Credit unions provide similar financial services to banks, like deposits, loans, and credit cards.
Another difference is that to join a credit union, you must meet specific requirements. Those requirements depend on how the credit union is organized. Most provide an application that outlines the requirements to become a member.
What is a Bank?
Unlike a credit union, a bank is a for-profit organization. This means they are either publicly traded or privately-owned companies. Banks focus on making a profit, and they make money from the fees they charge for their services. Banks accept deposits and make loans, like credit unions, and provide a wide range of additional financial services.
Pros and Cons: Credit Union Vs Bank
Selecting the right financial institution for your situation is an important decision. So, we want to make sure you have the necessary information at your fingertips to inform your choice. Below we lay out when to choose a credit union and when to select a bank to best suit your financial situation.
What are the Advantages of Using a Credit Union?
There are many advantages to using a credit union instead of a bank for your financial needs. Notably, credit unions offer better financial benefits than banks. Savings rates are often higher, and fees are reduced because of their nonprofit status. So, members often end up saving money by joining a credit union rather than a bank. A report by the Credit Union National Association (CUNA) found that in 2018 the average annual benefit for a household belonging to a credit union was $178. A credit union member usually receives this benefit by either receiving periodical dividend checks or by earning interest on their deposit account.
Because credit unions are nonprofit organizations, they typically have lower fees. Most credit unions have low or no minimum balance requirements, low to no ATM fees, and lower deposit requirements to open accounts. Also, another significant difference between a credit union and a bank is that a credit union usually has lower interest rates on loans than a bank.
Largely, the benefits of a credit union vs a bank come down to the customer experience. With a credit union, customer service is very members-oriented. Members receive personal attention for their financial needs. Credit unions have a wide range of financial education services, as well. On credit unions’ websites, members can easily access additional tools, articles, and even webinars to help them make informed financial decisions.
Also, because credit unions are member-owned, you have a say in how the credit union is run. Typically, members elect a volunteer board of directors to manage a credit union, so your vote counts.
When Should I Not Use a Credit Union?
Choosing a credit union for your financial needs is, in many cases, the clear winner. Though, sometimes your goals fit better with the services a bank offers. For example, not all credit unions offer specific kinds of loans, like commercial loans. However, credit unions like White River Credit Union offer recreational, home, and personal loans. So you still get a solid variety of loan coverage with a credit union.
Sometimes, credit unions only offer membership to individuals affiliated with a community served by the credit union in question. This could be limited to a specific city, county, or region of the state. Unlike certain credit unions, White River Credit Union serves the entire state of Washington, so membership is open to anyone in the state.
Are you considering joining a credit union for your financial needs? At White River Credit Union, we offer a wide range of financial services to take care of your financial well-being, whether that’s creating a savings account or securing a personal loan. We’re committed to your financial needs, so we put in the time and individual care needed to ensure your peace of mind and future stability. If you would like to sign up for a membership with White River Credit Union, reach out to us today; we’re happy to answer any questions you may have.