July 19, 2022
What are the big differences between a credit union and a bank? That’s a great question! Read on to find out.
Credit unions and banks have their differences, but they are also similar in many aspects. It’s true! Both have the same main objective to serve the financial needs of their customers or members. They also offer a variety products and services to help you manage your money your way.
Some things you’ll likely find at both a credit union and bank:
So what’s the difference? There are 3 main differences between a credit union and a bank.
It all boils down to how they do their business or how they accomplish their main objective and why they are in business in the first place.
A credit union is owned by its members. Membership = Ownership. Members can vote on the credit union’s volunteer board of directors as well as other decision making votes. At a credit union, more money is placed in your pocket and the focus is directed on serving you and your financial needs while creating a personal and personable experience.
A bank is owned by shareholders. These shareholders are the ones who make the financial decisions and may or may not actually be customers of the bank. Banks are required to turn higher profits to satisfy the shareholder demand for income and because of this, less money is returned to their customers.
Credit unions are nonprofit, meaning the primary purpose isn’t to make money, but rather to serve members and provide excellent service. Once the cost of expenses and operations are covered, the rest is returned in the form of dividends to the members through lower interest rates, lower or no fees, and higher returns on savings accounts.
Banks are for-profit, meaning they’re in business to make money. This typically means higher interest rates on loans and more service fees, but lower Annual Percentage Rates (APYs) on savings products.
Credit unions are customer service focused. The goal is to build lasting relationships with their members, becoming financial partners for life. Credit unions strive to be the trusted financial institution you turn to during exciting moments as well as during hardship. While credit unions are primarily focusing on member financial needs, they also put focus on the community and local charities.
Banks are less concerned with getting to know their customers and primarily focused on promoting services. Since banks are for-profit, they are looking to make money and they do this by promoting their services and quickly getting customers in and out.
|Meet Member/Owner Needs||Maximize Profit|
|OWNERSHIP||All Members – Users Of Service||Stockholders Who May Or May Not |
|BOARD OF |
OF NET INCOME
|Dividends Returned To Members |
Through Lower Loan Rates, Less Fees,
& Higher Return On Savings Accounts
|Dividends Issued To Stockholders|
|RATES||Lower Rates, Lower & Fewer Fees||Rates & Fees Tend To Be Higher |
Because Of For-Profit Status
|INSURANCE ON DEPOSITS||NCUA |
(National Credit Union Administration)
Up To $250,000
(Federal Deposit Insurance Corporation)
Up To $250,000
Here at Grove City Area Federal Credit Union, we are Banking but Better.