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May 04, 2022 General

How Is A Credit Union Different From A Bank?

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 most significant difference is that credit unions are not-for-profit organizations. They are owned by their members who benefit from the credit union’s profits and are governed by a board of directors.

Banks are for-profit businesses run by shareholders who benefit from the bank’s profits.

What Does This Mean For You?

Membership in 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 provide them at a higher return with lower fees than banks. Credit unions put their earnings towards improving and increasing the value of the credit union to its members. Credit unions pour profits back to their members through dividends, better rates, technological improvements, or other services.

Credit Unions vs. Banks

Size

  • Credit unions are smaller and community-focused.
  • Banks are often larger and nationally focused.

Ownership

  • The members have ownership in the credit union, passing profits to them.
  • Stockholders call the shoots for banks, and they divide profits among them.

Interest Rates

  • Credit unions usually offer lower interest rates.
  • Banks typically offer higher interest rates and transaction fees.

Federal Insured

A US government agency federally insures both banks and credit unions.

  • 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.

This article is for educational purposes only. WeStreet Credit Union makes no representations as to the accuracy, completeness, or specific suitability of any information presented. Information provided should not be relied on or interpreted as legal, tax or financial advice. Nor does the information directly relate to our products and/or services terms and conditions.