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ROUTING # 281076730


Credit Unions and Banks - What's the Difference?

Mar 2, 2022

It is not uncommon for people to refer to a credit union as a bank. After all, there are many similarities between the two! They both offer many similar products and services, but there are a few key differences. Much of the credit union difference is rooted in its structure as a Cooperative.  

Members, Not Customers 

When you join a credit union, you are a member and are not considered a customer. Each credit union has eligibility requirements to become a member, such as where you live or place of employment. And the members are the owners of the credit union, each contributing to the Cooperative model.  

Profits Go to Members, Not Shareholders 

Perhaps one of the biggest differences between credit unions and banks is how it handles its profits. As a credit union member, the profits from the credit union are reinvested in the credit union, essentially being shared with its members in the form of higher dividends on savings accounts, lower borrowing rates, and improved services. Banks use their profits to provide returns to a select group of shareholders. 

Nonprofit, Not For-Profit 

Since the credit union is owned by its members, it is essentially set up as a cooperative. Members participate in the cooperative by depositing savings or borrowing loans.  Banks, on the other hand, are for-profit, meaning that they are privately owned or publicly traded.  


Both credit unions and banks have their deposits insured, but not by the same agencies. Banks are insured by the Federal Deposit Insurance Corporation (FDIC), while credit unions are insured by the National Credit Union Administration (NCUA). The FDIC allows up to $250,000 per depositor, per bank, for each account ownership category. Similarly, the NCUA guarantees up to $250,000 per share owner, per insured credit union, for each account ownership category. 

Higher Savings Rates, Not Lower 

Keeping with the idea of passing the profits onto its members, credit unions are more likely to have higher savings rates and lower interest rates on loans when compared to banks. Credit unions also typically have lower fees.