Credit Unions Explained: What Makes Them Different from Banks

Traditional banks and credit unions both offer a number of the same services, but they are very different. Those who are considering a new bank account will want to compare both credit unions and banks to make sure they choose the right one for their needs. Some of the primary differences between them include the following. 

 Member-Owned Vs Profit-Driven

Traditional banks are run by shareholders, which means they are profit-driven. All profits obtained by the bank go to investors who control how the bank operates, changes to the way the bank works, and more. Credit unions, on the other hand, are member-owned, so when someone joins a credit union in Flagstaff, they become part owner. The profits in a credit union go back to the members instead of going to investors. 

Membership Qualifications

Banks have minimal qualifications for account holders, so almost anyone is able to get a bank account. A credit union, on the other hand, will limit membership to only those who qualify. This means that membership is limited to only those who meet the criteria, so there are fewer members than at a bank. Membership criteria can be based on location, family connections, employment, and other factors. 

Customer Service

Customer service can be limited at banks. While they do provide customer service for all account holders, it often is not personalized, and the account holder may not ever speak with the same person twice. On the other hand, with a credit union, customer service is far more personalized, and since there are fewer members, it may be possible to speak with the same person for help many times at the local branch. 

Loan and Savings Rates

Banks tend to have high interest rates for loans and low rates for savings accounts. On the other hand, credit unions typically have lower rates for loans, which can help members save more money. They also have higher interest rates on the savings accounts, so members get more in interest than they would with a traditional savings account. All of this means more money in the pockets of members. 

Fees and Rates

A traditional bank will have fees for many of the services it offers. The bank fees can quickly add up to a significant amount of money, especially over time, as the account holder uses their services. While credit unions do have some fees, they usually don’t have as many fees as a bank would, and the fees are lower, helping the member save even more money over time. 

Number of Branches

Banks tend to have branches throughout the US, making it easy to find an ATM or get help, even if the account holder moves to a new city or state. Credit unions, however, have fewer branches, and it may not be possible to stay with the same credit union when moving. While larger ones do have branches throughout the US, smaller ones may be location-based, so moving can mean having to find a new one to use. 

Are you ready to open a new checking or savings account? Opting to join a credit union instead of a bank can provide numerous benefits, as they are different from traditional banks. While it may be harder to qualify for a credit union, it can be a better option for those who meet the membership criteria. Take the time to look into both to see what might be a good fit for your financial needs.