Similarities between credit unions and banks
The primary commonality between banks and credit unions is that both institutions offer similar types of services. You'll find the option to open a savings account or a checking account at either a bank or a credit union. Most also offer the same type of loans, such as personal loans, mortgages, auto loans and student loans. Banks and credit unions also usually offer services for individuals and for businesses.
Also, any deposits you make at either a bank or a credit union are insured by a branch of the federal government for up to $250,0001 per depositor. It's worth noting that the organization that insures the money at banks is different from the organization that insures deposits at credit unions. The National Credit Union Administration (NCUA) protects the money at credit unions while the Federal Deposit Insurance Corporation (FDIC) protects the deposits at banks.
Differences between credit unions and banks
There are more differences between banks and credit unions than there are similarities. Most notably, the two types of financial institution have considerably different missions and purposes.
Credit unions exist to serve the needs of their members. Credit unions are nonprofit financial cooperatives. Any earnings are paid back to the members of the credit union in the form of lower interest rates on loans and higher interest rates on savings accounts. Banks, on the other hand, are for-profit and pay earnings to stockholders of the bank only.
Another notable difference between credit unions and banks is that people who open accounts at credit unions are called members, while people with accounts at banks are customers. Credit union members own a portion of the credit union, while bank customers do not own the bank.
A spirit of cooperation pervades most credit unions, which also sets them apart from banks. Cooperation is one of the guiding principles of credit unions and other cooperatives and it's what encourages the sharing of resources to make life more convenient for credit union members. An example of cooperative spirit is the Shared Branch Network, which provides members of credit unions with access to more than 5,400 full-service branches across the US, more than 30,000 ATMs in the U.S. and Canada and more than 800,000 ATMs around the world.
There's one more difference between credit unions and banks. Taxpayer money has never been used to bail out a credit union. The Savings & Loan bailout in the 1980s and the bailouts of banks that took place during the recent recession both used taxpayer money.
Credit union benefits
Joining a credit union doesn't only help you earn more money on your deposits and save money on loans. It also gives you a chance to give back to and strengthen your community.