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The Difference Between a Credit Union and a Bank

When deciding where to do your banking, you have the option of either a traditional bank or a credit union. Before you chose, it is important to understand the differences between these two types of institutions.

Once of the biggest differences between credit unions and banks is how they are run. Credit unions are locally owned and operated, and membership is required. Credit union membership is often based on employment (or family relationships) in the military, schools and various other local employers. Banks, however, are publicly traded, for-profit entities. Because you are a member and not a customer at a credit union, everyone has equal ownership and it is often an overall more satisfying banking experience. At a credit union, the focus is on members rather than turning a profit.

Tax Exemptions Mean Better Rates

Credit unions are often exempt from many state and federal taxes, resulting in a variety of benefits for members. With the money saved from tax exemptions, credit unions are able to offer lower interest rates than banks for mortgages, loans and credit cards, particularly if you have good credit. Credit unions are also able to offer high interest rates on savings accounts, and lower penalties for overdrafts and late payments. You also have a better chance of getting a free checking account at a credit union as banks often need to attach a fee to checking accounts in order to generate revenue, whereas credit unions are non-profit.

Convenience and Variety of Service

There are, however, still certain advantages of using a bank that a credit union may not be able to offer. Often times, there may very few, or even only one, branches of a credit union. Banks are typically much larger chains, many even on a national level, so there are more locations at your disposal no matter where you are, offering greater convenience, and the same applies to ATM machines when you need to make a quick withdrawal and don’t want to pay a user fee. Banks do not require membership, and anyone can join, so there is no need to have any family or work relationship. You may also find that banks are able to offer a larger selection of services than credit unions may be able to, such as retirement funds and stock investing.

When shopping for a financial institution, your decision should be based on what best meets your personal needs. The professionals at Advantage CCS can help you examine and weigh your options when deciding on where to do your banking and the best way to manage your funds to ensure financial security.