Credit Unions vs. Banks—What’s the Difference?
When deciding where to manage your finances, choosing between a credit union and a bank can be not only challenging but daunting too. If you’re struggling with this decision, know that you’re not alone. It’s a common dilemma many consumers face.
Read on to learn more about the differences between credit unions and banks—and which may be right for your financial situation.
Understanding the Basics
At a fundamental level, credit unions and banks have key structural differences impacting their operations. Credit unions are not-for-profit organizations owned by their members. Banks are for-profit companies owned by shareholders seeking returns. These core distinctions shape their offerings and how they approach serving their account holders.
Ownership and Governance
The main difference in ownership between credit unions and banks is who owns them. Credit unions are not-for-profit organizations owned by their members, typically people in a certain geographic area. This means any profits the credit union makes go back to the members through lower fees, higher savings account rates, and lower loan rates.
Conversely, banks aim to make profits for their investors and shareholders. Because of this structure, as a bank customer, you are at the mercy of the bank’s primary goal of churning profits. What’s more, you do not have an actual say in operations like a credit union member does.
Rates and Fees
Credit unions typically offer more favorable rates and lower fees compared to banks. This difference stems from their not-for-profit structure. For instance, at Jeanne D’Arc Credit Union, members often enjoy lower loan interest rates and higher savings account yields. We return profits to members through better rates rather than distributing profits to shareholders.
The primary goal of banks, on the other hand, is to generate profits for shareholders. This often translates into higher fees and interest rates on loans for customers. While banks may offer a broader range of financial products, the cost of these services is typically higher than at credit unions.
ATM Fees and Shared Branching
Credit unions offer notable advantages when it comes to ATM fees and shared branching networks. Members typically enjoy lower or no fees at credit union ATMs and have access to a broader network of machines through shared branching. This network allows members to use ATMs of other credit unions without additional fees, providing greater convenience and cost savings.
Customer Service
Credit unions are known for their strong focus on member service. Since members are owners of the credit union, they prioritize the needs and experiences of the membership at large. Jeanne D’Arc Credit Union follows this model and prioritizes member satisfaction. This approach often results in more personalized service, where members feel more like valued participants rather than just customers.
For example, our staffers are more accessible and willing to go the extra mile to assist members. This contrasts with the more corporate environment of banks, where customer service can sometimes feel more transactional and less personal.
Services Offered
Credit unions provide basic financial products similar to banks. However, credit unions also offer more customized services tailored to their members and the regions they serve. This local focus allows credit unions to match products and services to their members’ needs.
For example, Jeanne D’Arc Credit Union offers standard products like home and business loans, checking and savings accounts, and CDs. We also have specialized lending programs for students and those looking to consolidate debt.
This customized approach allows credit unions to build financial products to serve their unique membership base. Large banks tend to offer more generic options with less regional customization.
Community-Focus
Another major difference is the focus on community involvement for credit unions versus banks. Because they’re owned by members who live and work nearby, credit unions tend to have more programs targeted toward helping their local communities thrive.
This can include sponsoring youth sports teams or giving grants to nonprofits doing good work in the area. It’s a way of reinvesting profits back into the community that banks don’t do since they are owned by shareholders nationwide.
For instance, Jeanne D’Arc Credit Union has proactively partnered with local schools and charities in our community. We organize events like food drives and walk-a-thons to support important causes. This involvement showcases our dedication to reinvesting in the community and is central to our ethos as a member-owned institution.
Why Join a Credit Union?
Joining a credit union is a decision that goes beyond conventional banking. It means joining a community where personal support and collective financial welfare are key. This member-first approach results in a banking experience that values each member’s input in guiding the institution’s direction and operations.
How to Join a Credit Union
Joining a credit union like Jeanne D’Arc involves a few steps. You’ll first need to determine your eligibility. If you qualify, you must open a membership account and deposit $5. This money will stay in that account until you close it.
Once you’re a member, you can access the full range of credit union services. This includes loans, savings accounts, and other financial products. Being a member also means you have a say in how the credit union runs through voting rights and the ability to participate in key decision-making processes.
Do Credit Unions Help Build Credit?
The attractive rates offered by credit unions play a crucial role in a common question many members have: do credit unions build credit? The answer is yes: by providing affordable loan options and credit-building financial products, credit unions support their members in building and maintaining strong credit histories.
At Jeanne D’Arc, we offer financial products like credit cards and loans that allow you to demonstrate responsible usage. Making all your payments on time shows creditors you are reliable. Showing your responsibility and reliability is essential for establishing a strong credit history.
We also provide a financial wellness program with tools and coaching to help you manage your finances wisely. Our certified counselors can review your credit report with you and offer guidance on improving your credit score. We have workshops that cover credit basics, repairing credit, and avoiding fraud.
Taking advantage of these free resources is an excellent way to learn how to rebuild your credit or maintain good credit habits. By equipping yourself with financial knowledge, you’ll be set up for success as you use our products to build your credit.
Find Your Financial Fit With a Credit Union
Credit unions prioritize serving members over earning profits. This people-first mentality leads to competitive rates and community support. If personal service, responsible pricing, and local engagement are important to you— a credit union may suit your financial needs best.
At Jeanne D’Arc Credit Union, we commit to providing tailored financial solutions that meet your unique needs. Our team offers expert advice, personalized service, and a range of products designed to empower your financial journey. Click below to learn more about the benefits of joining our people-first credit union.