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Credit Unions vs. Banks: What’s the Difference and How to Choose?

  • Online Banking
  • May 2023
  • Premier America

As your dreams grow, so do your financial needs. While you may be satisfied (or not) with a traditional bank, now is the perfect time to take a moment and explore a great alternative: credit unions. You just might be surprised to discover valuable tools for smarter spending, better banking, greater savings, and even better service.

Banks and credit unions both offer the same essential products and services like checking and savings accounts, loans, as well as insurance, investment, and online banking services. However, the differences are clear.

The Benefits of a Credit Union:

Credit Unions, like Premier America have one goal: to provide members with the right financial tools to meet today’s needs and reach tomorrow’s dreams by offering:
  • No fees (or low fees)
  • Higher dividend savings rates
  • Lower interest rates on loans
  • Personalized customer service
  • Committed to serving and investing in local communities
Credit Unions are owned by and serve their members, not shareholders
 
Traditional banks often charge fees for basic products and services like checking accounts. Additionally, they traditionally have offered lower rates on deposits and more fees. More recently, some of the larger financial institutions are exiting offering mortgage and home equity loans.
 

A Credit Union is Not-for-profit

Banks are for-profit businesses owned by shareholders, who influence how banks are run. Banks develop products and services for customers that will generate a profit to benefit their investors, not necessarily their customers. This usually translates into higher interest rates on loans, lower savings rates, and more fees—monthly maintenance, overdraft, etc.
 
Credit Unions, on the other hand, are not-for-profit cooperatives that exist to serve their members and their mission of ‘people helping people.’ Any profit a credit union earns is reinvested in better products and services for its members and their communities. This means more money back to members by way of lower rates on loans, higher savings rates and fewer to no fees, as well as charitable giving and educational programs for the community.

What does it mean to be a member vs. a customer?

While banks have customers, credit unions serve members who are the member-owners of the cooperative. At Premier America Credit Union, those who live, work, go to school or worship in Los Angeles County, Ventura County, and Harris County in Texas can open a membership.
 
As a bank customer, eligibility standards might be more lenient, but goods and services might be more expensive due to greater account minimums or higher interest rates on loans.

Credit Unions have robust digital networks

Credit Unions and banks both offer in-person and online banking.
 
National banks have locations in most major cities but often miss the smaller communities. Large banks sometimes have extended phone support hours, which is why chat integrations continue to launch and evolve. Additionally, both have a wide network of 30,000+ ATMs nationwide.
 
Both banks and credit unions offer online banking. At Premier America, members enjoy secure and easy online and mobile banking tools.
 
 So, which is best for you?

Here are four tips for choosing which is right for you:

  1. Compare rates. Research your local credit union and bank websites for your desired savings account, credit card, or other loans. A quick apples-to-apples analysis will usually show that the credit union rates and costs are more competitive and in line with your needs
  2. Review the fees. Read the fine print. For example look for any hidden fees including anything from application fees to closing costs. For a savings account, compare the account minimums and penalties for falling short. Typically, the credit union will come out on top.
  3. Assess your needs. If you are looking for a personalized banking experience with less fees, then your local credit union may be the best option. Travel often? With many locations and extended phone hours provided by national banks will be better equipped for you.
  4. See who is committed to you and your neighbor. A credit union exists to help strengthen communities, yourself included. Credit unions often invest heavily in community programs, social support charities, and local schools. Not only that, credit unions invest in members through financial wellness programs, coaching, and a hands-on approach to financial well-being.
Choosing a credit union or bank ultimately comes down to your short-term and long-term financial goals. Credit unions tend to offer lower rates and better customer service compared to banks who may provide more products and services, but their fees, rates, and customer service can vary.

About Premier America

Premier America Credit Union is committed to providing exceptional service to individuals and small businesses. We offer business, youth, and regular savings accounts as well as smart checking accounts. Our members enjoy free online services including home banking, bill pay and Zelle®. Your trusted credit union is committed to helping you realize your dreams faster.
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