Credit Union vs. Bank: Which is Right for You?

If you are looking to borrow, invest, or set up a checking or savings account, you may be asking yourself whether you should consider a bank or credit union. Chances are, you’ve worked with a bank before and understand how they operate. But what makes a credit union different from a bank? Let’s take a close look at credit unions, how they differ, and why they may be the better option for your financial needs.

Products & Services at Credit Unions and Banks

Bank or credit union, you are probably looking for the best place to stash or borrow cash. Both banks and credit unions offer savings accounts to park your money and checking accounts for day-to-day spending. Both offer long-term savings products, such as certificates of deposit and money market accounts, and banks and credit unions can set up and manage your IRA or other retirement investments, as well.

Almost all banks and credit unions now offer online account access and mobile apps for banking on the go. You can apply for a mortgage, car loan, or home equity line of credit at each, and both have in-system, fee-free ATMs, debit and credit card offerings, and branches you can visit in person. When you use a bank as your financial institution, your money is insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000. With a credit union, the National Credit Union Administration (NCUA) insures your money for the same $250,000. Despite offering many of the same products and services, banks and credit unions function very differently. Let’s take a look at how.

For-Profit Versus Not-For-Profit

Banks are for-profit organizations. Meaning, their primary objective is to make money for their shareholders. Banks make money by charging an interest rate on money borrowed that is higher than the rate they pay on banked money. For instance, if you get a 0.05 percent interest rate of return on your savings account at a bank, it makes sense that you would pay 5 percent interest or more on a loan from the same bank. That’s because the bank needs to make enough money to cover operating expenses and provide a profit for their shareholders.

A credit union is much different than a bank. Credit unions are non-profit memberships that return financial gains to their members, mainly in the form of lower interest rates on borrowed products and higher interest rates on banked products. There are many different types of memberships that define credit unions. Location, military service, occupation, and affiliation are just a few ways people can join credit unions.

At USALLIANCE Financial, if a potential member does not qualify for membership based on location, occupation, military service, or affiliation, they have the option to join one of our partnership charities. With this option, USALLIANCE will make a donation or pay for membership to these groups on your behalf.

Do Banks Have More Fees than Credit Unions?

So, what do for-profit and not-for-profit mean to you as a customer? For-profit businesses like banks need to attract large customer bases to stay competitive with several branch locations and special promotions. However, banks will also pack more fees into the services they provide in order to remain successful in attracting and attaining customers while still being profitable for shareholders. Many banks have minimum balance fees for checking and/or savings accounts and charge for every out-of-network ATM transaction.

However, accounts at credit unions, such as the MyLife Checking Account at USALLIANCE Financial, have no maintenance fees or minimum balance requirements. USALLIANCE is also a part of the Cooperative network, allowing members access to over 30,000 surcharge-free ATMs and over 5,900 shared branches for members to address all of their banking needs. If there are no in-network ATMs available to you and a fee is charged, you may be eligible to receive up to $10 per month in ATM fees reimbursed.

Do Credit Unions Have Better Service Than Banks?

Another advantage to banking at a credit union is service. You don’t have to dig deep to find service horror stories from bank customers. Whether you are being shuttled from one telephone agent to another all over the country or stuck trying to explain your problem to a chatbot, big banks rarely have you work with one person until you resolve your issue, which can lead to a lot of frustration.

Not only do credit unions offer their members the best rates they can afford on borrowing and investment products, but they also enjoy reputations for better quality customer service. Credit union branches are smaller, and you are more likely to develop a relationship with a representative and receive personalized service. Remember, at credit unions, you are not only the customer, but you’re also a member, and that entitles you to more say. If you have a bad customer service experience at a credit union, you have more recourse to action as a member.

Which Have Better Interest Rates: Banks or Credit Unions?

There are many different types of banks and credit unions, and it’s important to explore individual interest rates when comparing. Brick and mortar banks have more overhead costs and usually charge higher rates than online-only banks. The sole purpose of most credit unions is to provide the best benefits possible to their members. Since credit unions don’t have to worry about generating a profit for their shareholders, that revenue circulates back to members, creating better interest rates. That said, if lower interest rates are your number one priority, it’s always good to browse before making a decision.

Yes, But Banks Have Credit Unions Beat When It Comes to ATMs and Technology, Right?

Historically, banks have credit unions beat when it comes to convenience. As for-profits, they can sink more money into cutting-edge tech and app development. They can park more ATMs across the nation and have more physical branches, traditionally, as well. If you are researching whether to use a bank or a credit union for your financial needs, you would see that most articles online give banks the edge when it comes to access and technology.

But those numbers are starting to shift. For instance, Bank of America boasts 4,300 retail financial centers and approximately 17,000 ATMs as of July 2021. However, USALLIANCE Finance has more than 5,900 shared co-op branches, 30,000 surcharge-free ATMs, and 14 exclusively USALLIANCE branches. Collective business models or shared-co-op branches have extended credit union networks dramatically across the nation. ATM access points have similarly expanded. Relationships with Allpoint or SUM and other surcharge-free ATM providers have created a network that extends to more national free-of-charge ATM locations than many of the big banks can offer.

Further, banking apps have been around for enough time now for credit unions to close in on banks’ head start when it comes to technology. Today, many of the same bells and whistles available from online banks at the forefront of app development and tech disruption are also available from credit unions. Customers are happy with the features of those digital products based on app store ratings. USALLIANCE’s industry-leading banking app has an average 4.0 rating across the iOS and Android stores combined.

Is Joining a Credit Union Right for You?

Credit unions offer many of the same products as banks. You can open a checking account, or a savings account to deposit your funds, and you can borrow for school, a house, a car, or take out many other types of loans. But, unlike banks, credit unions’ highest priority is not making money for their shareholders. As a member of a credit union, you are the shareholder. Credit unions care more about their members’ insights and opinions. They aim to charge the lowest interest rates on borrowing products and pay the highest interest rates on investment products. They share many of the same perks, such as no-charge ATM networks and mobile banking, but with fewer fees and better service.