What is the difference between a bank and a credit union?

When it comes to managing your money, you have several options available to you, including banks and credit unions. Both institutions offer similar services, such as checking and savings accounts, loans, and credit cards. 

However, there are significant differences between the two, including ownership, fees, and customer service. In this article, we will take a closer look at them. 

Difference between bank and credit union

One of the most significant differences between banks and credit unions is ownership. Banks are for-profit institutions owned by shareholders who invest in the bank's success. They are focused on maximizing profits and delivering returns to their investors.

On the other hand, credit unions are not-for-profit institutions owned by their members. Anyone can join a credit union, but you must meet certain eligibility requirements, such as living in a particular geographic area or being a member of a specific organization. As a member-owner, you have a say in how the credit union is run, including electing the board of directors.

Banks and credit unions both charge fees for their services, but the types and amounts of fees can vary. Banks tend to have higher fees than credit unions, and they often charge fees for services such as ATM withdrawals, overdrafts, and monthly maintenance fees. Credit unions, on the other hand, typically have lower fees and may even offer fee-free services, such as free checking accounts.

Another key difference between banks and credit unions is customer service. Banks tend to be larger institutions with multiple branches and a larger customer base. As a result, customer service can be impersonal, and it may be difficult to get personalized attention when you need it. Credit unions, on the other hand, tend to be smaller and more community-oriented. They may offer more personalized service, such as assigning a dedicated account representative to work with you.

Banks and credit unions also differ in the interest rates they offer on loans and savings accounts. Credit unions tend to have higher interest rates on savings accounts and CDs but may charge higher interest rates on loans. Banks, on the other hand, tend to have lower interest rates on savings accounts and CDs but may offer lower interest rates on loans. This can make a big difference in the amount of money you earn or pay on loans over time.

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To conclude, both banks and credit unions offer similar services, but they have significant differences in ownership, fees, customer service, and interest rates. Banks are for-profit institutions owned by shareholders, tend to have higher fees, and may offer impersonal customer service. Credit unions are not-for-profit institutions owned by their members, have lower fees, and may offer more personalized customer service. Understanding these differences can help you make an informed decision when choosing a financial institution to manage your money.

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