But did you know nearly 6 million people in the United States were unbanked or not keeping their money in a checking or savings account at all in 2021?
While banks and credit unions both provide customers with a place to put their money for safekeeping, they aren’t created equal. Both financial institutions offer services such as checking and savings accounts, loans, and investment services, but how they approach banking and the philosophy behind customer—or member—service are quite different.
If you’re shopping for a new place to keep your money, you should understand the similarities and differences between opening an account with a bank versus a credit union.
Banks and credit unions offer most of the same services, including all the financial products most people and businesses need on a day-to-day basis, such as:
Federal insurance: Accounts for both banks and credit unions are federally insured for up to $250,000. The Federal Deposit Insurance Corporation insures bank deposits, and the National Credit Union Administration insures credit union accounts.
Retirement planning: If you’re looking for help with retirement, both banks and credit unions offer individual retirement accounts (IRAs), Roth IRAs, and affiliated investment services for retirement planning.
Credit cards: Banks and credit unions offer credit cards, some of which offer rewards, rebates, and other benefits.
Despite the similarities covered above, credit unions are increasingly seen as the better choice for many Americans. Here are several key differences between banks and credit unions.
Since they are cooperatives, credit unions can apply the money they earn and give profits back to members in the form of lower fees and better interest rates. Their goal is to serve their members, unlike banks, which are expected to show profits.
Credit unions are open to most members of their communities. For example, iQ Credit Union will allow anyone to join who lives, works, worships, or attends school in Washington state or these counties in northern Oregon: Clackamas, Columbia, Hood River, Multnomah, Washington, or Yamhill.
Those who choose to join benefit from better interest rates, lower fees, and other membership perks, such as reduced rates on auto loans, discounts on closing costs for mortgages or home equity loans, and an increase in interest payments for certificates of deposit. iQ also offers added perks for credit cardholders, such as three no annual fee credit cards, 24/7 fraud protection, travel insurance, auto rental insurance, and more.
National banks rely on regional branch offices to provide services to customers, including ATM access, across the country. Big banks try to make ATMs accessible in as many locations as possible, and they charge transaction fees for using other ATMs.
Most credit unions don't have branches coast to coast, so credit unions have partnered together to create a national cooperative network of credit union branches and ATMs that eliminate fees for their members.
One of the big differences between banks and credit unions is how they serve their communities. For credit unions, community is defined by its membership, whether members belong to the same union, work for the same company, or live in the same area. Credit unions are dedicated to helping their members, and that includes investing in their local communities with educational support, charitable programs, and other activities. Credit unions also place a high value on financial literacy and educating their members.
Credit union customer service tends to be more personal. With credit unions, you’re a member—not just another customer or account number. At a credit union, your contacts’ job titles may be different to reflect their focus on relationships and personal service. For example, you may talk to a loan officer rather than a banker, a member service representative rather than a teller, or a member advisor rather than a personal banker. Credit unions are structured to assist members. At iQ, for example, the idea of “people helping people” is part of every service we offer.
You also will find that credit unions can be easier to work with and more flexible when it comes to meeting members’ needs. For example, when you apply for a loan, banks tend to use fixed approval criteria related to your credit score and financial history. Credit unions tend to know their members and are more willing to take a closer look at individual circumstances, so application criteria don’t have to be black and white. That’s the personalized experience of credit union membership.
Banks are businesses, which means they are created to generate a profit. Credit unions, by contrast, are not-for-profit and designed to serve those who are eligible to join and are structured as cooperatives. Whereas banks make money for investors, credit unions serve their members, and every member is a shareholder.
One of the biggest differences between credit unions and banks is size. Whereas a commercial bank in the top 250 banks has an average of $83 billion in assets, a top 250 credit union has an average of $4.8 million in assets. Even though credit unions tend to have fewer assets, they provide the same banking services and often can boast that they provide higher-quality service to members.
So, where would you rather keep your money? When you trust your money to a credit union, you become a member of a cooperative. You get the same services and benefits as you would from a bank, but you also become part of a community.
Credit unions offer more personalized services and customized benefits, such as lower interest rates on loans and higher returns on savings. When you join a credit union, you are keeping your money close to home in an institution that gives back to the community.
A credit union is committed to helping its members meet their financial goals. It can help with major life events, such as raising a family, buying a home, paying for college, or retiring. Your credit union will be there when you need it.