Six Key Differences to Help You Decide Which Path is Right for You and Your Money
This article is about the differences between Credit Unions and Traditional Banks. Since we are the Ashland Community Credit Union, we may be biased. Still, we honor the truth and think that everyone deserves it, not just a version of it.
If you’ve ever wondered what a credit union is and how it differs from a traditional bank, then this article is for you. Credit unions and banks both offer similar financial services, but they have distinct structures and benefits.
Profit Structure
- Credit Unions: They are member-owned, meaning that as a member, you are also a partial owner. Any profits made are returned to members in the form of lower fees, better interest rates, or improved services.
- Banks: Banks are for-profit institutions, meaning they are owned by shareholders who expect a return on their investments.
Fees and Restrictions
- Credit Unions: Because they are non-profit, credit unions generally charge fewer and lower fees for services like checking accounts, overdrafts, or ATM usage. And, if you don’t like certain fees, you can always bring your concerns to the board.
- Banks: Fees tend to be higher and more numerous at banks, as they are driven by profit.
Interest Rates
- Credit Unions: They typically offer better rates on savings accounts, CDs, and loans (including mortgages, auto loans, and personal loans) because they don’t have to pay dividends to shareholders.
- Banks: Banks set their interest rates based on their calculations. Typically, they try to be competitive with other banks.
Service
Credit Unions: Due to their smaller size and member-focused structure, credit unions are often known for providing more personalized and customer-friendly service.
Banks: Large national banks may offer a wider range of services but tend to be less personalized and more transactional in nature.
Decision Making
- Credit Unions: Each member has a vote in important decisions, like electing the board of directors.
- Banks: Customers have no say in governance; control is in the hands of shareholders.
Eligibility
- Credit Unions: Membership in credit unions is often restricted to people who meet specific criteria (e.g., live in a certain area, work in a particular field, or are part of a specific organization). For instance, here at the Ashland Community Credit, members should live, work, worship, or attend school in Ashland County to join. If you look around, you’ll likely find a credit union that matches your description.
- Banks: Anyone can typically open an account with a bank without restrictions. This may help if you are moving to a different location or traveling internationally.
You can open an account at a big bank, or you can join a credit union. The choice is yours based on your own unique preferences and individual goals. Both will take care of your financial needs with products and services of excellence.
As far as we are concerned, if you decide based on interest rates, customer service, structure, or decision-making…the credit union usually has an advantage.
Learn more about joining a credit union. Reach out, and let’s talk about you.
