What's the Difference in a Bank and a CU? (2024)

FAQs

What's the Difference in a Bank and a CU? ›

The main difference between the two is that banks are typically for-profit institutions while credit unions are not-for-profit and distribute their profits among their members. Credit unions also tend to serve a specific region or community.

​Banks emphasize business and consumer accounts, and many provide trust services. Credit unions emphasize consumer deposit and loan services. ​Savings institutions emphasize real estate financing.

Banks are for profit, owned by it's investors and paid; board of directors runs the bank. FDIC(Federal Deposit Insurance Corporation) insures customers money if bank goes out of business. Money up to 250,000. Credit Unions are NON profit, owned by it's members.

Generally, credit unions are viewed as safer than banks, although deposits at both types of financial institutions are usually insured at the same dollar amounts. The FDIC insures deposits at most banks, and the NCUA insures deposits at most credit unions.

With a bank, the board of directors are elected by the stockholders. With a credit union, the board of directors are elected by the members.

Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network such as Allpoint or MoneyPass.

First, bankers believe it is unfair that credit unions are exempt from federal taxation while the taxes that banks pay represent a significant fraction of their earnings—33 percent last year. Second, bankers believe that credit unions have been allowed to expand far beyond their original purpose.

Aside from deposit products and lending services, many banks also offer credit products, home and auto products, investment products, and more. Credit unions offer most of the same products that banks offer, but they are members-only, nonprofit financial institutions.

They earn interest on the securities they hold. They earn fees for customer services, such as checking accounts, financial counseling, loan servicing and the sales of other financial products (e.g., insurance and mutual funds).

Can a credit union crash like a bank? ›

Just like banks, credit unions are federally insured; however, credit unions are not insured by the Federal Deposit Insurance Corporation (FDIC). Instead, the National Credit Union Administration (NCUA) is the federal insurer of credit unions, making them just as safe as traditional banks.

Credit unions tend to have lower interest rates for loans and lower fees. Banks often have more branches and ATMs nationwide. Many credit unions have shared branches and surcharge-free ATMs provided through the CO-OP Shared Branch network. Banks have historically had better technology online and for mobile apps.

Through right of offset, the government allows banks and credit unions to access the savings of their account holders under certain circ*mstances. This is allowed when the consumer misses a debt payment owed to that same financial institution.

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.

Banks are typically for-profit entities owned by shareholders who expect to earn dividends. Credit unions, on the other hand, are not-for-profit, member-owned cooperatives that are committed to the financial success of the individuals, families, and communities they serve.

bank in a recession, the credit union is likely to fare a little better. Both can be hit hard by tough economic conditions, but credit unions were statistically less likely to fail during the Great Recession. But no matter which you go with, you shouldn't worry about losing money.

Instead of distributing profits among shareholders in the form of dividends, credit unions share their “profits” with all of their members in the form of low rates on loans, higher rates on savings accounts and lower fees overall.

One of the major downsides of traditional banking is the potential for fees. Traditional banks often charge various fees for services such as overdrafts, ATM withdrawals, and account maintenance. These fees can quickly add up and eat into your savings if you're not careful.

Any income the credit union generates through interest, fees and loans is then used to fund community projects, reinvest into the organization or provide services that directly benefit members, like paying higher savings interest rates.