You may have heard the term “credit union” before but didn’t know exactly what it means. After all, it looks exactly like a bank, how much difference can there be? As it turns out, while credit unions do some of the same functions as a bank, the business models of both institutions couldn’t be more different. How? Keep reading to find out!
The Profit Issue
The biggest difference between credit unions and banks is that banks are for-profit and credit unions are not-for-profit organizations. Banks exist to make a profit off of their customers and give those large profits to a small group of owners. Credit unions, on the other hand, take their small profits and give them to a large group of owners (their members) along with many other benefits such as lower fees and interest rates. So in a credit union, each customer is a member/owner of that institution.
Another difference you may notice with credit unions vs. banks is that credit unions tend to emphasize local relationships and community. Banks can be very large organizations with branches all over the country, but credit unions are typically found in your community with fewer branches, and they really thrive on the personal relationships that they make through their interactions with their members. Credit Unions are also notoriously known for giving back to their community and being involved in local causes. This is because they know their members so well and enjoy helping the community in which they serve.
Being a member of a credit union gives you much more than a place to hold your money. Even though there may only be a couple of local branches, credit unions such as WCU offer what is called “shared branching”. This means that no matter where you are in the USA, if you are near a credit union that participates in shared branching, you can access your account, make deposits or withdrawals and make loan payments. There are currently over 5,000 credit union branches participating in shared branching.
As mentioned above, another benefit of being a credit union member is that credit unions typically have lower interest rates on loans, lower fees, and higher interest rates on deposits, due to the fact that credit unions give the profits back to the member/owners.
As a credit union member, you also have access to special discounts through “Love My Credit Union Rewards,” a website that lets you log in and receive exclusive discounts on goods and services that you use everyday–just for having an account!
As you can see, there are some major differences between banks and credit unions. Neither are bad options when it comes to your finances, but with a credit union, you gain so much more than just a place to hold your money–you gain a community.