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Difference Between a Credit Union and Bank

What you'll learn: The differences between credit unions and banks


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. The difference between a credit union and bank varies 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 are More than Just A Member

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

Because credit unions are not indebted to stockholders, they’re free to set the bar higher with standards and benefits their members can stand behind — the same members who also happen to be their customers. Your membership delivers a huge variety of benefits. Incredible rates, outstanding financial products, and even discounts from companies that offer special pricing to members belong to you expressly because you’re a member.

Experience Elevated Member Service

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 at the forefront.

Members are the owners and the entire reason for a credit union’s existence, so they deserve to be treated as such. Even the largest credit unions are smaller than the monster banks that keep you on hold for even the most basic customer service needs. Stick with your credit union long enough, and you’re more likely to meet familiar faces and build relationships than at a sprawling, impersonal institution. Less stress and less time spent crawling through voicemail systems — isn’t that an advantage worth banking on?

Stop Constant Fees

Because credit unions don’t have to show a profit at the end of the year, they’re not forced to pelt you with service fees, maintenance fees, penalties, and other annoying costs. You’ll still see a few basic fees on your statement that cover the cost of doing business, but credit unions don’t have to scavenge for every last penny because they’re not in business to make a profit.

Let Your Money Work for You

Another difference between a credit union and bank is the credit union not-for-profit business model. You save money on interest and earn a higher rate of return on your savings. Sound too good to be true? Check the average rates from the National Credit Union Administration and compare banking rates against credit union rates. Discounting the inevitable outliers, credit unions generally outperform banks when it comes to making your money work hard for you.

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.

Why We Do What We Do

The fundamental difference between a credit union and bank 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. It is easier than you think to make the switch from a bank to a credit union.


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