Credit Union vs Bank
What’s the difference?
Would you rather be a member-owner or customer?
While both credit unions and banks are institutions designed to help with your financial needs, the two actually have a few very notable differences.
WHAT IS A BANK?
Banks are for-profits owned by stockholders or investors. You might be asking yourself what this means if you’re a bank customer. It’s simple: any profits made by a bank are used to pay out dividends to stockholders, which means that you don’t directly benefit from being a bank customer unless you own shares of the company.
WHAT IS A CREDIT UNION?
Credit unions are run in a way that benefits you directly. It all starts with the fact that credit unions are owned by members, aka, you! In other words, banks are public organizations, while credit unions are not-for-profit.
According to the National Credit Union Administration, there were more than 5,000 credit unions with over 120 million members as of December 2020.
The credit union motto is “People Helping People,” and it’s no wonder because credit union members quite literally borrow money from one another. Think of the way credit unions operate as a closed-loop: members make deposits to save money and then other members can borrow that same money.
Credit union field of membership
Most credit unions require that you live, work, worship, or go to school in a certain area of the credit union, while others require that you also work a certain type of job in order to qualify for membership. Meanwhile, anyone can become a bank customer.
Number of members of credit unions in the United States from 2013 to 2020 (in millions, shown in the graphic below):
Bank stakeholders versus credit union ownership
The private ownership credit unions offer members is a big reason why savings accounts are known as “share accounts” at these not-for-profits. When members take out loans at credit unions, they borrow money from other members. This also explains why members of credit unions are called “members.”
If you have an account at a bank, you’re known as a customer, not a member, because the money borrowed for loans does not come from others that are part of the organization. Banks are therefore funded by investors, just like other public businesses.
Credit union loan and savings rates
Credit unions are traditionally known for having a community-feel and friendly service. They are also known for offering lower rates on loans, making them a great option if you are considering taking out an auto loan or home equity loan or even if you want to refinance. Expect lower and fewer fees when you join a credit union.
Due to being for-profit financial institutions, banks find it hard to compete with credit unions when it comes to lower interest rates and fees. You may end up paying more in fees at a bank, such as bounced checks or overdrafts. The same goes for interest rates on loans and savings accounts.
Credit unions may be limited to the region, county, or city they’re in. However, many credit unions are part of Co-Op financial services which gives their members access to over 30,000 surcharge-free ATMs nationwide. Many credit unions also offer great mobile banking services including online banking, mobile apps, bill pay, mobile deposit, and card control apps.
According to the NCUA, which regularly compares the rates for credit unions versus banks, credit unions produced higher interest rates on Certificates of Deposit (CDs), money market, and savings accounts while also posting lower interest rates on home and auto loans during the fourth quarter of 2020.
Become a MEMBER at Vital FCU!
Vital Federal Credit Union is a community-based credit union that is run democratically. We offer checking and savings accounts, personal, and vehicle loans, as well as credit card services to our members. Come visit our credit union or check our field of membership and apply today!
Consider what you want your financial institution to do for you, and remember to trust the organization that you choose!
Come visit our credit union
IN-PERSON OR ONLINE
Visit the Vital Federal Credit Union home page
Spartanburg BRANCH ADDRESS
1000 Asheville Highway
Spartanburg, South Carolina 29303
PHONE NUMBERS
Work: (864) 948-8200
HOURS OF OPERATION
Spartanburg Branch:
Monday - Thursday: 8:30 a.m - 5:00 p.m.
Friday: 8:00 a.m. - 5:00 p.m.
Saturday-Sunday: CLOSED
For your convenience, a coin counter machine is located in the lobby of both branches. Access your accounts through the 24/7 VITAL ATMs at either branch or one of over 30,000 surcharge-free ATMs around the United States.