What is the Difference Between a Bank and a Credit Union?

One of the most common questions we hear at Lanco Federal Credit Union is, “What is the difference between a bank and a credit union?” We get it—before you choose a financial institution, you want to make sure you understand all of the details of where your money is going to be kept safe.

At Lanco FCU, we work hard to ensure all of our members are satisfied with our service, but we also want to keep you informed. So, in today’s post, we’re going to elaborate more on the differences between a bank and a credit union. After reading this topic, we’re confident that you’ll be happier in choosing a credit union like Lanco FCU versus any other bank in Lancaster, PA.

What is a Federal Credit Union?

Let’s start by presenting what a credit union is. In short, a credit union is a not-for-profit financial institution that provides banking services through a cooperative business model. As explained by the National Credit Union Foundation, “the central goal of a cooperative is to place service and benefit to members above all else.” In addition, a credit union’s membership shares a common bond, such as living in a geographic region, working for a specific employer, or involvement with a particular organization. For these reasons, credit unions are very focused on serving the needs of their members and community.

Credit unions offer a variety of banking services to individuals, businesses, and other entities. These services include savings and checking accounts, debit and credit cards, loans, and online and mobile banking, just to name a few. In addition, the savings of each member of a federal credit union are federally insured up to at least $250,000 by NCUA (National Credit Union Administration). But let’s get into the significant differences between a bank and credit union and why millions of Americans choose to bank with credit unions like Lanco FCU.

So, What is the Difference Between a Bank and a Credit Union?

Even though credit unions and banks function similarly, there is one main difference—credit unions are not-for-profit institutions owned by members. In contrast, banks are for-profit institutions that are owned privately. But how does this difference affect you?

It all comes down to who benefits from the earnings created when you use banking services. As a bank customer, when your bank makes a profit, earnings get paid to its shareholders. On the other hand, as a credit union member, your financial well-being is at the center of your financial institution’s profit motive. As a result, a credit union’s earnings get returned to its members through lower interest rates, lower fees, and the payment of higher dividends and rewards.

Some other key differences between credit unions and banks include:

• Service Locations: In general, most people think of banks as having more branch and ATM locations than credit unions. While this may often be the case, credit unions are also much less likely to impose fees on members who want to access in-person services or use out-of-network ATMs. Plus, many credit unions participate in the CO-OP Shared Branch network, which allows their members to receive services at any participating credit union. Through this cooperation, Shared Branch credit unions make up the largest branch network in the country!*
• Member Support: Credit unions only do well when their members do well, so providing excellent member service is key to their success. Credit union representatives belong to the same communities they serve, and they prioritize getting to know their members to best understand and meet their needs. Whether in person, online or on the phone, credit union members enjoy personalized service without having to pay high fees just to talk to a real person.

How Do I Choose Between a Bank or Credit Union?

At the end of the day, choosing between a bank and a credit union will depend on the services and values you’re looking for in a financial institution. For example, our members here at Lanco FCU are happy to be part of a member-owned credit union that’s part of their local community in Lancaster County. However, suppose you live somewhere else or rely heavily on being able to do every aspect of your banking online. In that case, you may want to compare other institutions local to you or that provide online-only banking.

Like the Sound of a Federal Credit Union?

Now that we’ve talked about the benefits of credit unions and the difference between the two types of financial institutions, are you ready to join? If so, you can apply online to open an account—it’s that simple! Or, if you have any questions, please call us or text us to learn more.

*As of January 2019. Data from CO-OP Financial Services.