Comparing Banks vs. Credit Unions

Have you ever wondered what the difference is between a bank and a credit union? Is keeping your money in a bank or credit union better? Is one safer than the other? Keep reading to learn more.

Banks and credit unions both offer customers a place to keep their money. They provide similar services like bank accounts, loans, and other financial products.

Goals

The biggest difference between banks and credit unions is their main goal. Banks are for-profit businesses, meaning they are owned by a group of people called shareholders, who earn income through the bank selling services or from interest on loans given. Credit unions are not-for-profit businesses. This doesn’t mean they are a nonprofit charity; it just means that their goal is to provide financial services rather than earn money. Money earned by a not-for-profit credit union is given back to the credit union to help make it better instead of giving money to shareholders.

Membership

Anyone can use services offered at a bank. Credit unions only offer services to their members. Each credit union will have its own membership requirements, but most allow people to join if they live in a certain location or work for a specific company. You can apply for membership at the same time you apply to open an account.

Size

Banks are typically larger than credit unions. Because of this, they often offer more products and services than credit unions and have more advanced apps and other technology. Credit unions are smaller which may allow them to offer better customer service or personalized support like individual financial coaching. Because profits aren’t going to shareholders, credit unions may also be able to offer lower interest rates on loans and better rates on savings accounts and certificates of deposit.

Deposit Insurance

The most important thing to look for when choosing a bank or credit union is that they offer insurance to protect your money, called deposit insurance. Banks offer deposit insurance through the FDIC and credit unions offer insurance through the NCUA. Both the FDIC and NCUA protect up to $250,000 per account owner per account type (like an individual account, an account shared with someone else, and certain retirement accounts). Accounts like checking accounts, savings accounts, and certificates of deposits are insured. Investments like stocks and bonds are not insured. FDIC or NCUA insurance is automatically added when you open an insured account; you don’t need to sign up for it. Banks and credit unions will advertise on their websites and in their physical locations if they are FDIC or NCUA insured. If you’re not sure, you can ask a customer service representative.

Need Support?

Choosing whether to keep your money in a bank or credit union depends on your needs and goals; one isn’t better than the other. If you need help comparing different bank and credit union accounts, reach out to an Accredited Financial Counselor® at Northwest Access Fund for support!