Credit Unions vs. Banks – Why Choose One Over the Other? – Empeople (2024)

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 Empeople 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 Empeople’s market rates.

3. 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 Empeople 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:digital banking, mobile wallets, mobile deposits, fraud alerts and much more.

At Empeople, 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:

AspectsBanks Credit Unions
Structure For-ProfitNon-Profit
Rates & Fees Lower rates on accounts; higher rates on loans and credit cardsHigher rate on accounts; lower rates on loans and credit cards
Customer Service ImpersonalFriendlier, better.
Location & Network National or globalMajority local, with some on national scale
Technology Highly advancedModerately 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!

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

Empeople 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 Empeople. I always feel like Empeople has my best interest in mind. ” – Deborah

Becoming a member at Empeople 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?

Credit Unions vs. Banks – Why Choose One Over the Other? – Empeople (2024)

FAQs

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

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.

Why do people prefer credit unions over banks? ›

Credit unions tend to offer lower rates and fees as well as more personalized customer service. However, banks may offer more variety in loans and other financial products and may have larger networks that can make banking more convenient.

What is the downside of a credit union? ›

Limited accessibility. 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.

Why is it important to know the difference between a bank and a credit union? ›

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.

What is the main reason that credit unions generally offer different rates than banks? ›

NOT-FOR-PROFIT

Credit unions operate to promote the well-being of their members. Profits made by credit unions are returned back to members in the form of reduced fees, higher savings rates and lower loan rates.

Why do banks not like credit unions? ›

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.

What are 3 differences between a bank and a credit union? ›

But compared to banks, credit unions tend to be smaller, operate regionally and are not-for-profit. In many instances, they offer lower rates on loans, charge fewer fees and offer better interest rates for deposit accounts than traditional banks.

What are 3 pros and 3 cons for credit unions? ›

The Pros And Cons Of Credit Unions
  • Better interest rates on loans. Credit unions typically offer higher saving rates and lower loan rates compared to traditional banks. ...
  • High-level customer service. ...
  • Lower fees. ...
  • A variety of services. ...
  • Cross-collateralization. ...
  • Fewer branches, ATMs and services. ...
  • The biggest negative.
Oct 4, 2022

Is your money safer in a credit union or a bank? ›

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.

What is the main downside to opening an account at a credit union? ›

Credit union disadvantages

Membership may require meeting certain work, residential or occupational requirements. Many typically offer branches only in a limited area or region.

Are credit unions safer than banks during recession? ›

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.

What is one major difference between banks and credit unions? ›

What makes banks and credit unions different from each other is their profit status. Banks are for-profit, meaning they are either privately owned or publicly traded, while credit unions are nonprofit institutions.

What is the best bank for low income people? ›

Both Wells Fargo and Bank of America can be good choices for low-income earners since the direct deposit minimums are not overly burdensome.

Is it better to open an account at a bank or credit union? ›

Lower fees: Because credit unions are not-for-profit, they typically charge lower fees than banks. Higher savings rates: On average, you'll find better interest rates at credit unions than banks, though some high-yield accounts at banks rank at the top of the industry.

What is the benefit of a credit union? ›

Higher returns, better savings, low interest on borrowings, and a sense of community – these are just a few of the benefits of credit union membership.

Should I get a credit card through my bank or credit union? ›

Go with whatever is most convenient for you. For credit scoring purposes, either can be a good choice. Some have mentioned that the APRs are generally lower with credit cards from credit unions and that is often true. Still, if you are concerned about your APR, you are an accident waiting for a place to happen.

What is the biggest benefit of using a credit union? ›

The main benefits of a credit union vs. a bank are that credit unions tend to offer better rates and customer service, lower fees, and a national network of ATMs. However, a bank may offer more branches and products than a credit union.

Is my money safer in a credit union than a bank? ›

However, because credit unions serve mostly individuals and small businesses (rather than large investors) and are known to take fewer risks, credit unions are generally viewed as safer than banks in the event of a collapse. Regardless, both types of financial institutions are equally protected.

Why do people go to credit unions? ›

Because they don't have to pay profits to shareholders as banks do, credit unions often can pass that money on to their members, by offering higher APYs on savings accounts and CDs and lower APRs on loans. Credit unions offer some of the best checking accounts, high-yield savings accounts, and CD rates.

Why is it better to have your money in a credit union? ›

Expect lower interest rates and bigger returns with a Credit Union. Don't believe us? Take a look at our interest rates and see for yourself! Your money is safer in a Credit Unions hands because all accounts are federally insured up to $250,000 and backed by the U.S. government.

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