The Real Difference between Credit Unions and Banks
Credit unions have been around since the mid-1800s, yet many consumers are still unaware of what a credit union is or how it differs from a traditional bank. A credit union is a not-for-profit financial institution that is run for and by its members. While we offer the same services and products you would find at your current bank, our guiding principles and organizational structure differ greatly.
Credit Unions vs Banks
How to join
Banks do not have any requirements to sign up for a basic account, except perhaps a minimum balance. Credit union accounts can only be used if you become a member. The process to join is simple, and could be based a variety of factors depending on the credit union. Some membership requirements may be:
- Location – based upon what geographic location you live or work
- Career – some credit unions operate on behalf of the employees of a specific company or industry
- Family – if a member of your family is already a member of a credit union, you may automatically be eligible
- Common bonds – membership could be based upon what church you attend, if you’re an alumni of a participating school, if you’re part of a labor union, among many others
Regardless of what the requirements are, most credit unions will work hard to help you qualify for membership and make the process easy for you.
When you open an account at a bank, you’re considered a customer. They are happy to take your business, but aren’t interested in giving you control of major business decisions. Business affairs are controlled by stockholders and a board of directors.
Credit unions are the complete opposite. Instead of being a customer, when you open an account at a credit union, you must join and become a member. Credit unions are run by a governing board of members who are voted in by other members. You not only have a say in who makes the major business decisions but you can actually volunteer for a spot on the board yourself.
As a for-profit business, a bank has a responsibility to its shareholders and investors. Any surplus earnings will go to them first. Credit unions have a not-for-profit designation, and give their surplus earning back to their members. You might see these profits in the form of:
- Lower interest rates on consumer loans like car loans and credit cards
- Higher yields on savings and checking accounts
- Fewer fees attached to products and services
- Financial education and resources for members
Philosophy & Guiding Principles
Credit unions have a unique business outlook, revolving around cooperative business practices for the benefit of their members. There are networks of credit unions across the state, country, and even the globe that are dedicated to brainstorming better business practices, innovating financial services, and learning how to better serve their members.
One of the best examples of this is the Co-op ATM network. Since most credit unions are based locally, they don’t have the ability to place ATMs for their members five states away. However, many consumers point to easy ATM access as one of the defining factors behind what debit card they use. Credit unions across the country collaborated to create the Co-op ATM network. This network allows members to use ATMs at participating credit unions nationwide. While one of the most well-known banks in America has an impressive 16,000 ATMs available in the country, the credit union Co-op network boasts over 30,000 ATMs that are fee-free. That is the power of cooperative thinking!
Products & Services Offered
This is where the difference between a credit union and a bank is hardly noticeable. Any service you find at a major bank can usually be found at your local credit union, with the added benefit of being able to speak to a representative in person.
Here are just a few of the many products and services offered at AmeriChoice.:
- Auto loans
- Credit cards
- Home and mobile banking
- Mobile check deposit
- Savings accounts
- Debit cards
- And many more…
Security & Stability
You may already know that banks are insured up to $250,000 by the FDIC, a government agency. This insurance protects the individuals who deposit their own money into a bank against losses up to $250,000. Credit unions offer the same amount of insurance for members, the only difference is the agency who oversees the program is the National Credit Union Administration (NCUA).
Why Should You Pick a Credit Union over a Bank?
If you feel a strong connection with your local community, and want to support a financial institution dedicated to improving that community, then a credit union is the right choice. If you appreciate fewer fees attached to the products and services you’re using on a regular basis, then a credit union is the right choice. If you want to open an account at a place that values you as a member rather than a customer, then a credit union is absolutely the right choice.
Now that you know the difference between a bank and a credit union, which will you choose? Become a member of AmeriChoice Federal Credit Union and experience the credit union difference first-hand. Joining is easy, and we’ll walk you through every step of the process. Join today!