What’s the difference between a credit union and a bank? And which one’s better?

So people ask me all the time, which is better, a bank or a credit union? The truth is they each have their pros and cons, so it depends on what you’re looking for. 

Now, here are the top five differences between a credit union and a bank and you can decide.

Firstly, the biggest difference is the way the two institutions are structured. Credit Unions are cooperatives, meaning that members are actually owners of the company. As owners, they are entitled to their share of the company’s profits- dividends. And these dividends are typically paid out in the form of interest. That’s why credit unions tend to offer better interest rates than banks.

This brings me to the second difference, interest rates. Whew! We all know these have been out of control worldwide. 

Most times, credit unions will offer you lower interest rates on loans, like car loans and mortgages. While on the flip side, they offer higher interest rates on savings accounts. Banks usually offer some 0.001% interest rate on savings accounts. Which is essentially useless and would take forever to make any real impact on your account. Higher interest rates saving accounts are much better.

Number three on our list is the difference in fees.

This was a hot topic a few weeks ago when banks announced they were raising the fees associated with accounts. With credit unions, the fees for everyday transactions are likely to be significantly less, depending, of course, on which institution.

Then there’s the matter of accessibility.

Credit Unions, by design, are smaller, not-for-profit institutions, so resources tend to be more limited. 

A will bank will have more branches, ABMs and typically better technology as well. Most local banks have smart ABMs that can do most of the transactions you’d go in-branch for. They also have online platforms, like apps to facilitate online banking.

And finally, number five is the product offering. Sure you’ll be able to get loans from a credit union but banks tend to have multiple options, with varying requirements and benefits. With a credit union, it’s one size fits all. 

So, like I said, it just depends on what you prefer and what you prioritise… And that’s the bottom line.

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