Credit Unions vs. Banks – Why Choose One Over the Other?

Ever wondered what the differences are between a credit union and a bank? Why credit unions are able to provide way lower rates than their big bank counterparts? Many people think credit unions and banks are one and the same, but there’s actually more to it than meets the eye. Suffice it to say, credit unions and banks are far from being one and the same.

1. Structure

The fundamental difference lies in the fact that banks are run as for-profit enterprises, whereas credit unions are nonprofit. Credit unions are also member-owned and all members have a say in how the business is run. Members are also usually allowed to participate in planning meetings and are always allowed to vote to elect a Board of Directors.[1].

While it’s true that any person can open an account with a traditional bank, credit unions are special in that they only serve defined geographic areas, employee groups, associations, religious or fraternal affiliations.

Find out more about how you can become a member at DECU and membership benefits.

2. Rates and Fees

High fees can be a frustrating aspect of having an account with a bank. With an enhanced, strong bottom line holding such a prominent place within banks, banks can have higher fees, lower rates on deposits, and higher interest rates on loans.[2].

On the other hand, credit unions are obliged to reinvest their income toward programs in order to qualify for nonprofit, tax-exempt status. Profits are not necessarily a priority for credit unions, however profits are used to allow us to reinvest back into our technology and memberships in the form of higher rates on deposits and lower interest rates on loans.

Check out some of DECU’s market rates.

couple meeting financial advisor3. Customer Service

Since banks are for-profit institutions, they typically have lower incentive to provide the best customer service. Many banks are huge national or global institutions and providing a warm and welcoming environment isn’t a top priority for them. It’s often said that credit unions sport friendlier and personalized customer service with a focus on being a community and a member-first business.[2] How would you feel when you walk through the doors and a staff member greets you by your first name?

4. Location & Network

This is where the convenience of traditional big banks shine. Since their reach is often nationwide or global, it’s hard to match the scale of their branches and network. Hop off to any part of the country (or even overseas) and you’re bound to find a branch or affiliate partner.[1]

If you’re part of a credit union, we make it just as easy! With today’s advancement in technology, going to a physical branch is becoming less of a necessity. What’s cool is that you can meet your banking needs anywhere there is an internet connection. We make banking so easy, you’d never have to start your car, sit in traffic and wait in line just to deposit a check.

What’s more? Our DECU customer service team is readily available to assist you 24/7 from any device. We actually get live representatives on the phone to help you, rather than having you frustratingly navigate through pre-recorded voice response systems.

5. Technology

Since big banks are able to expand quickly on a national and global scale, their budget allows for research and development towards better technology to serve their customers.[2]

However, in today’s hyper-connected world, the technological gap between the big and small players is closing fast. Today’s credit unions offer many of the same high-tech benefits that big banks offer, such as, mobile banking, online banking, mobile wallets, mobile deposits, fraud alerts and much more.

At DECU, we pride ourselves by being equipped with the latest technology to make banking with us a breeze from any device, anywhere you go.

In summary, here is a simple credit union vs. banks differences chart:

Aspects Banks Credit Unions
Structure For-Profit Non-Profit
Rates & Fees Lower rates on accounts; higher rates on loans and credit cards Higher rate on accounts; lower rates on loans and credit cards
Customer Service Impersonal Friendlier, better.
Location & Network National or global Majority local, with some on national scale
Technology Highly advanced Moderately advanced

Conclusion

The decision to go with a bank or a credit union is dependent upon for what you’re looking. People choose banks primarily because of the convenience of multiple branches across the country, along with better technology. On the flip side, people choose credit unions primarily because of discounted loan rates, higher interest rates and better customer service. So if you’re looking for great savings along with an attentive and personalized service to help you through life’s many milestones, credit unions are the way to go!

couple on deckDon’t just take our word for it. Here is real feedback and comments from our members:

DECU has always been, hands-down, the best I have experienced with banking. They have always answered any questions and assisted in any way they could to make my loans simple and easy with great rates that the banks can’t compete with. I trust using the credit union for 12 years now and would highly recommend them to any one of my fellow employees.” – Chad

“I was a first time buyer and was hesitant about making the move to buy my first car. I enjoyed the personalized service I received with DECU. I always feel like DECU has my best interest in mind. ” – Deborah

Becoming a member at DECU is simple and easy using our online application. Once you’re approved, you are a member for life. Have peace of mind knowing that you’ll be getting the best market rates along with the best service for all your banking needs.

References

[1] SmartAsset – Credit Union vs. Bank: How Are They Different?

[2] TheStreet – Credit Unions vs. Banks: What’s the Difference?