The Differences Between a Credit Union and a Bank
Credit unions have been around for over 160 years but the differences between credit unions and banks are not always well known. Credit unions and banks may appear to be very similar in terms of their branch locations and product offerings, but credit unions provide unique benefits compared to most banks.
Differences Between Credit Unions and Banks
Ownership Structure
One of the main differences between banks and credit unions is their ownership. Banks are for-profit financial institutions focused on generating profits for their shareholders. Credit unions are not-for-profit and owned by their members.
When you open a savings account at a credit union, you become a member-owner of the credit union which gives you access to its membership benefits.
Membership
Banks do not have restrictions on who can bank with them. Most credit unions have unique membership eligibility requirements that are defined in their charter. For example, some credit unions may serve people who live in a specific geographic area, work for a specific employer or belong to a specific organization. There are some credit unions that are open to everyone.
To become a member at CommunityAmerica, if you live or work in the Kansas City area or St. Louis county, you’re eligible. We have options if you don’t fit the geographical criteria: If a family member is either a current member or is eligible for membership by living or working within one of our 12 counties, you can join, too. An eligible family member is defined as a spouse, child, sibling, parent, grandparent, grandchild, aunt/uncle, niece/nephew, cousin or legal guardian and includes step, in-law and adoptive relationships.
Customer Service Focus
Credit unions are known for their personalized service and focus on building relationships with members. This can result in a tailored approach to financial well-being and a better overall member experience. Banks may have a more transactional relationship with their customers, with less emphasis on building long-term relationships and more of a focus on meeting shareholder expectations.
Products and Services
Credit unions and banks offer a range of financial products, including checking and savings accounts, loans and investments options. While banks and credit unions offer many of the same products, banks have pressure to meet shareholder expectations which can result in more fees and less favorable interest rates. On the other hand, credit unions focus on the success of their members, returning their profits to their members through lower fees and better interest rates. In fact, some credit unions will return their profits to members in the form of dividends. CommunityAmerica shares its profits with members through Profit Payout.
Federally Insured
NCUA and FDIC insures accounts up to $250,000 per depositor, per institution and per ownership category. If you're concerned your funds may not be fully covered, we recommend contacting your financial institution to review how your accounts are set up. If you are a credit union member, you can calculate the amount of coverage your insured funds have using the NCUA’s Share Insurance Estimator. The estimator can be used for personal, business or government accounts. Personal accounts include individual ownership, joint ownership, payable-on-death (accounts with named beneficiaries), living trusts and IRAs.
Understanding the differences between banks and credit unions can help you choose the one that’s best for you and your financial needs and goals. While the both types of financial institutions offer very similar products and services, the member-focused approach that credit unions provide may be a better fit for helping you achieve financial peace of mind.
