Understanding the Differences Between Banks and Credit Unions

Posted November 11 2013
by PenFed Team
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Customers regularly report much higher satisfaction with credit unions than banks. This lead has grown by leaps and bounds in recent years and it’s easy to understand why. Credit unions and banks are different on some very fundamental levels.

Banks are owned by shareholders and provide their services to customers so that shareholders earn profit. By comparison, you join a credit union to become a member-owner. Since credit unions are not for profit, any earnings translate into better rates for members. This basic difference informs every aspect of a credit union like PenFed.


You become a member of a credit union to access its financial benefits and become an owner. This isn’t just a euphemism. At a credit union like PenFed, you open a Share Account when you join. A 5 dollar deposit into that PenFed Share Account represents your financial share of the institution; every other member possesses the same share.

Your membership delivers a huge variety of benefits. Incredible rates, outstanding financial products, and even discounts from companies that offer special pricing to members.But these benefits belong to you expressly because you’re a member.

You Get a Vote

Banks are owned by shareholders, which operate the institution how they see fit. Customers merely use a bank’s products; they have no direct influence or say in how the bank is operated.

Credit union members elect their volunteer Board of Directors in a democratic election. Each member gets one vote. No matter how much money a member keeps in the credit union, or how many financial products that member uses… every member gets the same vote as any other.

This democratically elected Board of Directors doesn’t get paid for service to the credit union. It’s purely a volunteer position and any member can generally be nominated for the candidacy.

Customer-Focused Operation

At PenFed and other credit unions, the members always stay the top priority. When determining where to allocate resources, spend funds, and manage costs, credit unions constantly keep the members’ interests in the forefront.

Members are more than just a vague concept. Members are the owners and the entire reason for a credit union’s existence. They are real people who trust us to keep their money safe and deliver valuable financial products.

Field of Membership

Banks service customers, who can come from nearly anywhere. Credit unions serve its members who belong to specific communities referred to as a “field of membership.”

Some credit unions serve citizens who live in specific counties while others might be dedicated to employees at particular government agencies. Others, like PenFed, also serve our nation’s military and members of charitable organizations. There are many ways to join credit unions.

Why We Do What We Do

The fundamental difference between banks and credit unions boils to down one sentence: Banks exist to earn profit for shareholders while credit unions returns earnings to their members. Everything about a credit union is created and defined by its service to its members, from how its Board of Directors is elected to why its rates are so fantastic.

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