Choosing Between a Bank and a Credit Union

Couple meeting with a bank employee

Important financial decisions come up at many points throughout your life. Whether you are looking to save your hard-earned cash, buy a house or purchase a car, you must first decide which financial institution to trust with your money. Before considering specific institutions, you should also understand the differences between banks and credit unions and determine which best meets your needs. Piedmont Advantage Credit Union outlines some of the primary differences to help you compare.

Bank vs. Credit Union Ownership

Banks are for-profit institutions owned by their investors, who are stockholders in the company. Each stockholder has a certain number of votes to elect board members, which is relative to his or her investment in the company. While these shareholders do not necessarily bank at the institution in which they hold stock, they’re looking for a return on their investment and have a financial incentive. The board members at banks are typically paid employees.

In contrast, credit unions like Piedmont Advantage are not-for-profit financial cooperatives owned by their members. As with any cooperative, membership alone makes you a part owner of the company. Regardless of how much money you have in your account, your initial deposit gives you one vote to elect board members. These board members are volunteers and are members of the credit union. Any profits generated are given back to members in the form of lower loan rates, higher interest rates on savings and low fees. In fact, this is one of the primary reasons credit unions were started—to offer affordable credit and financial services to people within the community. As a result, many credit unions are known for their contributions to the local community, in addition to their products and services. While banks support their communities as well, community involvement may be less of a cultural priority for banks.

At Piedmont Advantage Credit Union, we take social responsibility very seriously. We partner with several organizations that impact our local communities here in North Carolina and even have global reach. Organizations include Financial Wellness Learning Series, the North Carolina Council for Economic Education and Tools for School Campaign, to name a few.  

Becoming a Customer or Member

One of the major allures of a bank is that nearly anyone can become a customer. If you can meet the bank’s minimum deposit amount and financial criteria, you can open an account or apply for a loan. 

Eligibility to become a member at a credit union varies. Some qualifying conditions include the industry in which you work, membership of a specific organization, where you live, where you go to school or worship or eligibility of a family member. For example, at Piedmont Advantage Credit Union, you can qualify to become a member if you live, work, worship or attend school in Bladen, Brunswick, Columbus, Duplin, Forsyth, Guilford, Iredell, Mecklenburg, New Hanover, Pender or Rockingham counties in North Carolina. You can also become a member if you are employed by one of these groups or even by supporting the USO of North Carolina with a $10 donation.

Evaluating Financial Offerings

Banks and credit unions tend to have similar financial offerings, including business and personal checking and savings accounts, certificates of deposit or share certificates, loans, and money market accounts, among others. Many banks boast diversity within their account divisions, such as specialty savings accounts, but most larger credit unions provide a range of financial products and solutions as well. While smaller credit unions generally offer less variety and frills in their accounts and loans, they are designed to be affordable for members.

Comparing Fees, Rates and Rewards at Banks & Credit Unions

Since credit unions were created in order to offer community members lower rates and fees on products like mortgages and auto loans, many people join a credit union to take advantage of a low auto loan rate while maintaining their checking account at a bank. Banking with a credit union can also offer advantages. Due to their non-profit status, credit unions are generally able to offer lower minimum balance requirements on checking accounts and low to no service charges.

In contrast, banks need to turn a profit. Banks often charge higher fees on less profitable types of accounts (like checking accounts) while offering lower interest rates on savings, unless you deposit a large sum of money. Additionally, banks often offer better credit card rewards but typically charge an annual fee.

Credit unions typically belong to a network that offers rewards on credit cards, like Visa ScoreCard Rewards, and often don’t charge annual credit card fees. According to Mike Schenk of the Credit Union National Association, the average late-payment fee at a bank is $35, compared to $22.50 at a credit union.

Prioritizing Customer Service, Convenience & Technology

These days, both banks and credit unions prioritize convenience, technology and customer service. Larger banks and credit unions will generally have more branch and ATM locations, while associated fees will vary by institution. Most institutions are part of nationwide ATM networks that allow people to access their money wherever they are. Additionally, most institutions offer convenient technology, including online and mobile banking, although specific offerings will be different for each bank or credit union.

Finally, most institutions will have a variety of ways their customers or members can get support, from robust website offerings like live chat, forms and FAQs, to phone and branch support. Smaller banks and most credit unions are generally known for more personal customer or member support, but like most other industries, true customer service policies and commitment will vary across institutions.

Understanding How Your Money Is Protected

Banks are regulated by several state and federal agencies: The Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency. On a local level, there are state banking regulators for state-chartered banks. 

Credit unions are regulated by the National Credit Union Administration (NCUA) on the federal level. NCUA is also responsible for the National Credit Union Share Insurance Fund (NCUSIF), which insures all federal credit unions and most state-chartered credit unions. State-chartered credit unions can also be regulated by state agencies. 

Both the FDIC and the NCUA are backed by the U.S. government and provide protection up to $250,000 per account holder per institution. Some banks and credit unions choose to be insured by private companies, which means they’re not required to insure your deposits by state or federal law. 

With all of these factors, how should you choose the financial institution that’s right for you? Consider fees, rates, financial product offerings, how often you need to access an ATM or branch and how your money is put to work within the community. If you have any questions about the differences between banks and credit unions, or would like to learn more about Piedmont Advantage Credit Union and how you can become a member, contact us today.

Headquartered in Winston-Salem, North Carolina, and founded in 1949 within the airline industry, Piedmont Advantage Credit Union (PACU) now serves member-owners, who reside, work, worship or attend school in one of the 13 counties it serves in North Carolina or who are employed by one of its many employer companies. These 13 counties are Bladen, Brunswick, Columbus, Cumberland, Davie, Duplin, Forsyth, Guilford, Iredell, Mecklenburg, New Hanover, Pender and Rockingham. A nonprofit cooperative financial institution, PACU has 10 branches throughout its service regions and employs a workforce of over 120.

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