How is a Credit Union Different From a Bank?

On the surface, a bank and a credit union might seem like they’re basically the same thing. They’re both financial institutions where a person can open a checking account, get a credit card, keep a savings account, take out a loan, or invest your money. But banks and credit unions aren’t necessarily the same things. So, what makes the services you get at a place like Bank of America different from the ones you get at a credit union like Genisys?

One of the key differences between a bank and a credit union is that credit unions do not operate for a profit. Since credit unions don’t have to worry about paying dividends to stockholders or investors, they’re able to offer their members lower fees and higher interest rates on interest-generating accounts and investments. Because of the fact that credit unions don’t have to answer to stockholders and therefore aren’t concerned with generating the largest profits possible, many people believe credit unions offer better customer service than regular banks do.

When a person is a credit union member, they own a stake in the credit union. All members of a credit union have an equal stake in the union, regardless of how much money they have invested there. Members are able to vote to elect people to a board of members and have the option to run to be elected to the board of members. Those who serve on the board of members do so voluntarily and aren’t paid for their time. On the other hand, a bank considers you a customer, not a part owner, and the board of members for banks are paid and customers have no say in who is on this board or how it’s run.

If you have damaged credit or other black marks on your financial history, a credit union might be more willing to give you a credit card or loan than a bank would be. Given the customer-centric focus associated with credit unions, they may be more willing to be flexible with an existing union member looking to get a loan or credit card than a bank would.

Credit unions do have their downsides, though. While they can offer lower rates and interest fees, they don’t often offer as many different options as banks do. Banks can have dozens of types of credit cards customers can sign up for, various types of checking and savings accounts, and multiple types of loans, but credit unions usually have fewer choices available.

Since banks often have more locations than credit unions, bank customers can have the luxury of being able to handle their banking needs at whichever branch location or ATM is most convenient. A credit union member could have fewer locations available to them, although many credit unions try to make ATM services more convenient by cooperating with other credit unions so their members can have greater access to ATMs.

Banks also often have more online banking options than credit unions do. Since banks operate for a profit, they’ve had more resources to invest in making online banking available to their customers over the years. Plenty of credit unions do have online banking options, but they might not be as sophisticated as the online services banks offer.

While a person might be able to walk into any bank they like and open a new account, it’s not so simple with credit unions. Some credit unions require members to live in a certain area, work for certain employers, be in a specific profession, or be a member of another type of organization.

Whether a bank or a credit union is largely up to you. Both places have their own pros and cons. If you’re a big fan of online banking and like the convenience of having lots of ATMs and branches locations in your area, a bank may be a better option for you. But if you like a more customer-focused experience, you may prefer being able to join a credit union if possible.