Credit union vs a bank: features or values?
It all comes down to purpose.
There are a lot of choices on where we can put our money these days. Checking accounts, savings and investments are the most popular. If you’re old school, maybe it’s an envelope under the mattress (disclaimer: we don’t recommend that).
Of course, the best place to put your money depends on your goals and preferences. In our ever-increasing digital world, a bank or credit union will be the safest place to manage these accounts. But how do you know which one to pick? We’ve got some ideas to consider.
Credit union vs bank: differences at a glance
The main difference between a credit union and a traditional bank is that credit unions are not-for-profit, whereas banks are for-profit entities. Here’s a quick overview:
| Credit unions | Banks |
|---|---|
| Not-for-profit, member owned financial cooperative | For profit, with profits benefitting shareholders |
| Focus on benefitting member communities | Focus on benefitting the corporation's bottom line |
| Insured up to $250,000 by the National Credit Union Administration (NCUA) | Insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) |
| Low to no fees | Higher fees |
| Lower loan interest rates | Higher loan interest rates |
Credit union benefits
Credit unions in the United States have a fascinating history. They were officially chartered in 1934 and played a critical role in providing much needed credit to people and small businesses. Many banks had failed or were not able to lend money during the Great Depression, leaving people without access to the money they needed to survive. Credit unions were able to continue lending money because they are funded by their members’ deposits rather than external investors.
Today, more than 140 million people belong to a credit union1. Members can vote on representation and participate in decisions. They also have access to many of the same products and services as banks, including checking and savings accounts, loan products, credit cards and investment accounts like IRAs.
Because credit unions are not-for-profit institutions (meaning they have tax exemption on their earnings) the biggest benefit of using one is that profits are returned to members instead of external shareholders. Members see profits through lower fees and better interest rates on accounts and loans. According to the Credit Union National Association, credit union members receive the annual savings equivalent of $179 per member or $376 per household.2
Bank benefits
Banks also have an interesting backstory. Did you know that Alexander Hamilton started the first national bank in 1791? Throughout U.S. history, centralized banks have been opened and closed in response to wars as a way to reestablish trade and industry and repay war debts. While the national banking system was great at serving commerce and government, it often struggled with “bank panic” every decade after the civil war (the Great Depression was a result of several “panics” following the stock market crash of 1929). Note: that’s why we have The Federal Reserve which was created to help prevent panics from happening today.
While there isn’t typically as strong of a focus on social mission, banks do offer more specialized product choices and more locations than most credit unions. Because banks are for-profit institutions, they are open to anyone who wants to open an account, no matter where they live or work in the world. Credit unions focus on the local communities they serve, so membership is determined in a way that aligns with what is important to you.
Why choose a credit union?
Both federally insured credit unions and banks are safe places to keep your money. Depending on your goals, you will find lower interest rates on loans and lines of credit at a credit union, whereas banks will have higher rates but typically offer more locations and products to choose from.
What it ultimately boils down to is: what are your values?
Most people think about interest rates, fees and convenience when choosing where to manage their money. That’s important, but your financial institution does more than just hold your money. It uses your deposits to make loans and investments that can support or oppose causes you care about.
Many local banks and credit unions give back to their communities through local lending and community development programs. Credit Unions in particular often support nonprofit organizations and provide extensive financial education programs.
Whether you prioritize environmental protection or social issues, there are financial institutions that share your beliefs. If this is something that sounds appealing to you, the Global Alliance for Banking on Values (GABV) lists all member banks and credit unions that are committed to social and environmental responsibility. Read more about Credit Human’s membership in the GABV.
Values-based banking doesn’t require sacrificing good financial products. Many values-aligned financial institutions, like Credit Human, offer competitive interest rates, low fees and modern banking features.
What you can expect from us.
If you’re looking for a more personalized, community-based banking approach, we invite you to visit us to see how much we care. For over 90 years we’ve been helping individuals, families and communities reach their financial goals by fostering connections, supporting local initiatives and investing in education. This commitment to community is the hallmark of the Credit Human philosophy.
Before you go: learn how our financial health centers support the community.
References: 1 https://ncua.gov/about/historical-timeline#1930s
2 https://ncua.gov/files/annual-reports/annual-report-2023.pdf
