Everyone has a choice when it comes to where we keep our money. Many people use banks because that’s what they are familiar with. However, credit unions offer a different approach to banking, including many benefits for members. Before deciding where to put your money, you should understand the operational and philosophical differences between credit unions and banks.
Banks and Credit Unions Are Structured Differently
Banks operate as businesses, which means they are created to generate a profit. Credit unions, by contrast, are designed to serve those who are eligible to join and are structured as cooperatives. Whereas banks make money for investors, credit unions are structured to serve their members.
As of March 31, 2020, there were 4,437 commercial banks operating in the United States, compared to 5,195 federally insured credit unions. One of the biggest differences between credit unions and banks is size. Whereas a commercial bank has an average of $3.89 billion in assets, a credit union has an average of $296 million in assets. Even though credit unions tend to have fewer assets, they provide the same banking services and often can boast of providing better quality of service for their members.
Banks and Credit Union Offer the Same Services
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:
- Checking and savings accounts: Both banks and credit unions offer checking and savings accounts, although account fees and interest payments differ.
- Retirement planning: If you are looking for help with retirement, both banks and credit unions offer independent retirement accounts (IRAs), Roth IRAs, and affiliated investment services for retirement planning.
- Loans: Both banks and credit unions offer a range of loan products, including mortgages, personal loans, auto loans, and business loans.
- Credit cards: Banks and credit unions offer credit cards, usually either Visa or Mastercard, that offer rewards, rebates, and other benefits.
- Mobile and online banking: Virtually all financial institutions now offer mobile and online banking, allowing you to make deposits, pay bills, transfer money, and perform other types of transactions from a smartphone or computer.
- Federal insurance: Accounts for both banks and credit unions are federally insured for up to $250,000. Bank deposits are insured by the Federal Deposit Insurance Corporation (FDIC), and credit union accounts are insured by the National Credit Union Administration (NCUA).
Significant Ways Banks and Credit Unions Differ
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.
As co-ops, credit unions can apply the money they earn and give profits back to members in the form of lower fees and better interest rates, such as auto loans. 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 (iQCU) will allow anyone to join who lives, works, worships, or attends school in Washington state or the six counties in northern Oregon with an iQCU. 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 mortgage or home equity loans, and an increase in interest payments for certificates of deposit. iQCU also offers added perks for credit cardholders, such as no annual fee, 24/7 fraud protection travel insurance, auto rental insurance, and more. And if you have an iQCU checking account you automatically receive identity theft protection.
Branch and ATM Locations
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. Because credit unions are smaller and usually have a smaller geographic coverage area, they can’t offer the same number of branches and ATMs—but they can offer national coverage without fees through a national cooperative network of affiliated credit unions and ATMs.
Community Investment and Involvement
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 they 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 are 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 iQCU, for example, the idea of “people helping people” is part of every service we offer.
Flexibility and Unique Member Needs
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.
When considering what kind of institution you want to trust with your money, consider the benefits of joining a credit union, like iQCU. As a credit union member, you become part of a cooperative in which you get all the benefits of a big bank but also belong to a community, which means more personalized service and more direct benefits, such as lower rates and higher interest payments. You want to choose a financial institution that can adapt to your needs as you encounter life events such as raising a family, buying a home, and ultimately retiring. You can trust your credit union to be there when you need them.