When you want to open a new checking or savings account, you have plenty of options available. Many cities have a bank or credit union on every block. While having so many choices is undoubtedly beneficial, it has led to a big debate: When it comes to commercial bank vs credit union options, which of these types of financial institutions is better?
The benefits of a credit union vs a bank can vary significantly. While no credit union or bank is the same, many of these institutions are fundamentally similar. By exploring the key differences between banks and credit unions, you can make an informed decision about where to go for your financial needs. Learn more about the different advantages of credit unions and banks below.
When it comes to a credit union versus bank comparison, the first key difference between these two types of institutions comes down to its ownership.
Commercial banks are for-profit organizations. That means that they are either publicly traded or privately owned. They are financial businesses that seek a profit. This can affect a large amount of the products that they offer. For example, banks may offer a more significant amount of loan options but incorporate higher interest rates, which means higher costs on your end.
When researching the benefits of joining a credit union, one thing you may notice right away is that credit unions are not for-profit organizations. Credit unions are non-profit; their focus is more on their account holders. They’re generally exempt from federal taxes, and they may even receive subsidies from affiliated organizations.
These profit statuses play a large role in getting a membership.
In the commercial bank vs credit union debate, one point to note is that credit unions can be more challenging to qualify for. Since they are non-profit organizations, they do not always have the financial means to provide memberships to individuals who do not meet creditworthiness guidelines or are not part of their community. Credit unions may choose to only offer memberships to specific groups within a community, such as a physical town, an organization, a religious faith and so on.
On the other hand, commercial banks generally do not have the same limitations when it comes to memberships.