What is the difference between credit unions and commercial banks

Similarities between credit unions and banks

Also, any deposits you make at either a bank or a credit union are insured by a branch of the federal government for up to $250,0001 per depositor. It's worth noting that the organization that insures the money at banks is different from the organization that insures deposits at credit unions. The National Credit Union Administration (NCUA) protects the money at credit unions while the Federal Deposit Insurance Corporation (FDIC) protects the deposits at banks.

Differences between credit unions and banks

There are more differences between banks and credit unions than there are similarities. Most notably, the two types of financial institution have considerably different missions and purposes.

Credit unions exist to serve the needs of their members. Credit unions are nonprofit financial cooperatives. Any earnings are paid back to the members of the credit union in the form of lower interest rates on loans and higher interest rates on savings accounts. Banks, on the other hand, are for-profit and pay earnings to stockholders of the bank only.

Another notable difference between credit unions and banks is that people who open accounts at credit unions are called members, while people with accounts at banks are customers. Credit union members own a portion of the credit union, while bank customers do not own the bank.

A spirit of cooperation pervades most credit unions, which also sets them apart from banks. Cooperation is one of the guiding principles of credit unions and other cooperatives and it's what encourages the sharing of resources to make life more convenient for credit union members. An example of cooperative spirit is the Shared Branch Network, which provides members of credit unions with access to more than 5,400 full-service branches across the US, more than 30,000 ATMs in the U.S. and Canada and more than 800,000 ATMs around the world.

There's one more difference between credit unions and banks. Taxpayer money has never been used to bail out a credit union. The Savings & Loan bailout in the 1980s and the bailouts of banks that took place during the recent recession both used taxpayer money.

Credit union benefits

Still need help deciding between a credit union and bank? Some of the benefits of a credit union include:

• Lower interest rates on loans.
• Higher interest rates on savings accounts.
• Access to online and mobile banking.
• Commitment to and investment in the local community.
• Members are owners of the credit union and have a say over how it is operated.

Making the SmartMove from a bank to a credit union doesn't only help you earn more money on your deposits and save money on loans. It also gives you a chance to give back to and strengthen your community.

Sources:

1. https://www.ncua.gov 
2. https://www.oklahomacentral.creditunion/Credit-Union-vs-Bank 

It is important to know the distinctions between a bank and a credit union when deciding which financial institution you want to be a member of. Although both financial institutions do similar things, each offer different pros for their members. The biggest difference between a bank and a credit union is that a bank is a for-profit institution and a credit union is a non-for-profit institution. You may be thinking, what does this mean? For banks, this means that they are in the business of maximizing profit and issuing dividends to their stockholders, not their customers. Since a credit union is a non-for-profit institution, they put their profits back into their members through lower fees, better rates, added locations, equipment, more ATMs, etc.

Now, let’s talk about the pros of Credit Unions. Credit Unions are local and community based while banks are national or regional based. This is important to consider because credit unions offer more personalized customer service than banks and allow members to have a common bond through their place of employment and where they live. Credit union’s primary purpose is meeting their member’s needs. Credit unions are not focused on making a profit as much as banks are, so they are able to offer their members lower fees, better interest rates on loans and higher yields on savings. Deciding whether you would rather be a member of a credit union versus a bank is all based on your personal preferences. If you are looking for a financial institution with better rates, lower fees, and a more personal connection then a credit union is the way to go.