Today, there are many banking options available to consumers, both online and in-person, which can make the financial process seem overwhelming. When looking to take out a loan or open a new checking account, the primary options are either a bank or a credit union, but which choice is right for you? What are the differences between the two?
Nonprofit vs Profit
Credit unions are not-for-profit and are set up as a cooperative. Credit unions are owned by their members and their focus is on providing their members with the best terms they can afford for their financial products. There is an emphasis on community engagement and support at credit unions and branches aim to offer hospitable, member-focused customer service. Here at Navigant, we are committed to giving back and providing our members with resources such as financial education programs or scholarships.
Banks are focused on making a profit, as opposed to meeting the needs of their customers. For this reason, banks typically charge more fees than credit unions do and interest rates on loans tend to be higher.
Credit unions are insured by the National Credit Union Administration (NCUA). The NCUA guarantees members up to $250,000 per share owner for each account ownership category.
On the other hand, the Federal Deposit Insurance Corporation (FDIC) insures banks. The FDIC guarantees account holders up to $250,000 per depositor, per institution, and per ownership category.
Banks typically have more physical locations than credit unions. To offset this imbalance, many credit unions are part of the Co-Op Solutions shared branch network. This means that if a credit union is part of the co-op’s network, the members of that specific credit union can partake in transactions at other credit unions in the network. Members can be served at approximately 5,700 shared branches across all 50 states. Members can also make loan payments, withdraw funds, and transfer money between accounts at these shared branches.
While the specific products may differ between the two, both banks and credit unions provide investment accounts and financial advisory services.
Which choice is best for you?
Credit unions are not-for-profit cooperatives and are insured by the National Credit Union Administration (NCUA). Credit unions generally provide their members with lower rates on loans, lower fees, and higher APYs on savings products due to their member-centric focus.
Banks are for-profit institutions and are insured by the Federal Deposit Insurance Corporation (FDIC). Banks have more physical locations and have slightly different financial product offerings than credit unions.