What’s the difference between a bank and a credit union? If you don’t know the answer, then it might be difficult for you to make the best choice about where to keep your money. The right financial institution can help you achieve your financial and life goals by giving you the tools and support you need.
Of course, at Addition Financial we know the difference between credit union and bank accounts. If you don’t, here are five differences between credit unions and banks that matter.
#1: Banks Aren’t Community-Based, Credit Unions Are
The first key difference between credit unions and banks is that credit unions are almost always community-based organizations that serve the people who live and work in the area where they’re located. Many banks have hundreds or thousands of locations and are not really part of the communities where their branches exist.
The credit union mindset is one of collective service. For example, Addition Financial had its start as a teachers’ credit union back in the 1930s. Our membership has evolved since then but our commitment to the communities we serve has not.
#2: Banks Have Strict Credit Requirements, Credit Unions Are More Flexible
The next key difference between credit unions and banks is that credit unions tend to be more flexible than banks when it comes to things like qualifying for loans and credit cards. If you don’t have a good credit history, you may have a difficult time getting the money and tools you need to succeed from a bank.
By contrast, credit unions exist to serve their members. They will often work with their members to help them establish or rebuild their credit, and it’s often easier to get a credit card, car loan or mortgage from a credit union than it is to get one from a bank.
#3: Banks Have Customers, Credit Unions Have Members
If you keep your money with a traditional bank, you’ll be a customer at a large corporation – one of potentially millions. Unless you have a lot of money, it’s unlikely you’ll receive any personalized attention from a bank. They earn their money by focusing on volume.
When you keep your money with a credit union, you’re more than a customer. You don’t simply sign up for an account, you join a credit union and become a member. As a member, you have access to a full array of financial tools and services to help you achieve your financial goals. It’s a very different, far more personal relationship than the one you can expect to have with a bank.
#4: Banks Are For-Profit Companies, Credit Unions are Non-Profit Organizations
Arguably the biggest and most important difference between credit unions and banks is that banks are for-profit enterprises. The goal of any bank is to earn money for its shareholders. That for-profit mindset affects everything they do, from setting fees to awarding credit and giving loans. A bank is always thinking about the bottom line.
Credit unions, on the other hand, are not-for-profit organizations. When the people who run a credit union make decisions about fees, penalties and credit approvals, they do so with the mindset of assisting their members and helping them to save money, plan for the future and achieve big goals like owning a home or planning for retirement.
One of the results of this key difference between credit unions and banks is that credit union interest rates and fees are often significantly lower than the interest rates and fees at banks. Credit unions are supportive while banks are profit-oriented.
#5: Banks Offer Minimal Customer Service, Credit Unions Prioritize Customer Service
The issue of customer service at banks is one that looms large for many Americans. A quick perusal of the annual list of “worst customer service” companies shows multiple banks with serious complaints about the service they provide to customers. They may offer boilerplate service at best and outright terrible service at worst.
By contrast, credit unions typically make customer service a priority. The financial health and status of their members is more important than anything else. You can get personalized attention that you simply wouldn’t get from a bank. If you have a question or problem, the staff of your credit union is there to help.
At the same time, credit unions often provide far more comprehensive services to their members than banks do to their customers. They may provide free financial advice and financial planning tools, so that members can learn how to manage their money and plan for the future.
Opening an account at a credit union is quite different from opening an account at a bank. The five key differences between credit unions and banks that we’ve listed here demonstrate the value of choosing a credit union.
To learn more about how Addition Financial’s savings accounts can help you reach your financial goals, please click here now.