Banks vs Credit Unions: What Are the Differences?

Credit unions and banks have many similarities, but it's the differences that really matter. Before you decide where to keep your money, it’s important to know how banks and credit unions compare, and consider a number of different factors like ownership, membership, locations, and more. Let’s examine banks vs credit unions and see how they stack up against each other.

Business Structure

Credit unions are structured around a not-for-profit model. Meaning, after expenses and reserves are set aside, profits are distributed back to members. These come in the form of higher returns and lower rates and fees, as well as free or low-cost services. Banks are businesses that earns a profit for shareholders through high rates and fees charged to customers.

Ownership

Credit unions are member-owned and member-operated. As a member of a credit union, you're also an owner/shareholder. Without outside shareholders or investors trying to maximize profits at the expense of our members, we are able to conduct business based on what we believe is in the best interest of our members. That means, we're able to pay out more interest on savings accounts, lower our rates on our loan products, and offer products you won't find at your typical bank - like a truly free, no-fee checking account.

Shareholders own banks. They buy stock in the bank and expect make a profit on their investment through the fees and rates customers pay.

Deposit Insurance

Credit unions are insured by the National Credit Union Administration (NCUA) up to $250,000. It’s an independent federal agency that keeps your money safe.

Banks are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. It’s also an independent federal agency that keeps your money safe.

Membership

Credit unions are community based. In order to be a member, you must meet an eligibility requirement such as employment or education at certain companies, school or organizations; live, work, or worship in certain geological locations; or be (or become) a member or certain charitable organizations.

Anyone can open an account at a bank. They are viewed as customers and don’t need affiliation or membership. When it comes to being a shareholder, anyone can invest—shareholders don’t need to have an affiliation or even an account with the bank.

Locations

Smaller size means better, more personalized service. While most credit unions may not have as many branches or ATMs in your local area as those corporate banks, many credit unions, including USALLIANCE, participate in ATM and brand-sharing networks - so members can do their banking with us even if there isn't a physical branch nearby. These days, credit unions also have digital banking capabilities that stack up with the biggest banks in the world, so you can do most of your banking on your computer or mobile app.

Banks usually have a greater reach and can offer more locations and ATMs. Large banks can be found in many places, making it convenient for customers to travel. Access to bank services is usually greater in terms of hours of locations, including evenings and weekends, as well as hours of customer support.