Credit Unions vs. Banks: What's The Difference?

When you’re looking for a new checking or savings account, moving to a new city, or just looking to change your financial institution, you have an important decision to make: going with a credit union or a bank. There are some significant differences between the two, and it’s important to know them so you can make an informed financial decision. 

What is a Credit Union

A credit union is a cooperative, not-for-profit financial institution.

It is member-owned and controlled through a board of directors elected by the membership. Therefore, becoming a member means you own a part of the organization. The board serves on a volunteer basis, and revises policy, sets dividend and loan rates, and directs certain operations. 

The result: members are provided with a safe, convenient place to save and borrow at reasonable rates at an institution which exists to benefit them, not to make a profit. 

EFCU Financial offers checking accounts, savings accounts, certificates with great rates and many loan options. 

Pros of a Credit Union

• Lower loans rates
• Higher deposit dividends
• Fewer and lower fees
• Excellent customer service
• Accounts insured by NCUA up to $250,000

Cons of a Credit Union

• May have eligibility requirements to join
• May have fewer branch locations

What is a Bank

A bank is a for-profit financial institution owned by a group of shareholders. The bank makes money for those shareholders and profits off of the products and services that it offers. 

Pros of a Bank

• Easy to join
• May have more branch locations
• Accounts insured by FDIC up to $250,000

Cons of a Bank

• Higher loan rates
• Lower deposit dividends
• More and higher fees
• Less personal customer service

3 Significant Differences between a Credit Union and a Bank

Membership Eligibility

Credit Union: To become a member, you are required to be a part of their common bond. For example:

• Employees of a specific company
• Residents of a specific location
• Military members

Bank: Anyone can become a bank customer. 

For-Profit vs. Not-for-Profit

Credit Union: Credit Unions are not-for-profit organizations. Profits are put back into the credit union and their communities which allows for lower rates, higher dividends, and fewer fees. 

Bank: Banks are for-profit corporations. They aim to maximize profit and those profits go to shareholders. 

NCUA vs. FDIC

Credit Union: The National Credit Union Administration (NCUA) insures all credit unions up to at least $250,000 per individual depositor.

Bank: The Federal Deposit Insurance Corporation (FDIC) insures banks up to at least $250,000 per individual depositor.

Join EFCU Financial

At EFCU Financial, we strive to bring our members exceptional service and superior benefits. For more than 88 years, our focus has been member-centered. We are proud to serve South Louisiana with 8 branch locations in Baton Rouge, Gonzales, Prairieville and Denham Springs. Anyone who lives, works, worships or attends school in Baton Rouge, Gonzales, Prairieville or Denham Springs may join EFCU Financial.