Credit Union vs. Bank: How to Decide

At first glance, the similarities between banks and credit unions might seem evident.

After all, both offer checking accounts, savings accounts, and even loans and credit cards.

But believe it or not, there are some very real differences between banks and credit unions that may affect your banking experience.

What is a Bank?

A bank is a business.

Banks allow you to deposit your money with them. In turn, they’ll lend out a portion of that money to people who need loans. Banks earn interest off of the loans, and to entice you to deposit more money (so they can make more loans and earn more interest), they offer you a small amount of interest in turn.

In general, banks will let anyone open an account with them. There usually aren’t any specific requirements to open an account besides living within the bank’s service area, being a U.S. citizen, and meeting the minimum balance requirements.Banks can be owned by private investors or traded openly on the stock market. Either way, banks do have owners and shareholders that they’re beholden to, and this drives a lot of the decisions that banks make.

What is a Credit Union?

A credit union, on the other hand, is a nonprofit organization.

Credit unions are owned by members, which are people who actually use the credit union. If you open an account or take out a loan at a credit union, you are a member. Membership is usually restricted to people in a certain group.

For example, credit union membership is commonly restricted to people who live or work in certain areas, who work for certain employers, or who have a family connection to the credit union. Many credit unions (but not all) also allow you to become a member by joining a related nonprofit organization for a small fee.

Differences Between Banks and Credit Unions

In addition to the structure of a credit union vs. bank, there are often differences between the products offered, interest rates you can earn, convenient features, and customer service.

Products

Credit unions often offer a wider range of savings accounts. If you’re looking for a Holiday Club savings account to help you save for the holidays throughout the year, for example, you’ll have an easier time finding this at a bank vs. a credit union. It’s also very common for credit unions to offer kids’ and teens’ savings accounts.

Banks, on the other hand, may be more likely to offer more specialized high-end products such as wealth management, investments, or business accounts.

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