Nov 14, 2021
Credit Unions vs Banks: What’s the Difference?
When it comes to banking, you have options. If you’ve been exploring ways to pay fewer fees and get more out of your banking, it might be time to consider a credit union. But what’s the difference? While both credit unions and banks offer similar products and services like checking and savings accounts, loans, and credit cards, there are fundamental distinctions between the two that essentially shape how both financial institutions operate.
What’s the credit union difference?
The key distinction between a credit union and a bank lies in the credit union philosophies of “People helping people” and “Not for profit, not for charity, but for service.” Since its beginning in southern Germany in 1849, credit unions have maintained the purpose of serving their members, not shareholders. Banks are privately owned or publicly traded, which means they’re driven by the need to make a profit. Credit unions, on the other hand, are member-owned, not-for-profit cooperatives that work to put people ahead of any profits.
Which financial institution offers better rates on loans and deposits?
The contrast between for-profit and not-for-profit can be seen in the way banks and credit unions work. Because banks are beholden to shareholders, the need to make a profit will often fall on their customers meaning more fees and less competitive rates on savings accounts. The not-for-profit status of a credit union means that any profit that is made by the credit union is returned to its members in the form of better rates on auto and home loans, higher savings rates, and reduced fees.
What can a credit union do for me that a big bank won’t?
Besides offering better rates on products like savings accounts and loans, credit unions offer a more personal approach when it comes to service. There are no customers at a credit union but instead, they are part owners and members of their financial institution and the service reflects just that. While big banks rely heavily on computer algorithms to assess the approval of loans, credit unions are able to apply a more human perspective and take into consideration other factors in an individual’s life in order to help make a positive difference.
Credit unions are also locally-owned which helps them have a better understanding of the importance of having an interest in the well-being of the people in their community. From generous sponsorships to worthy local organizations to empowering its members through financial education, credit unions give back with an aim of improving the financial lives of the people because ultimately, their success lies in the community it serves.
Do credit unions offer the same access to my money that banks offer?
While banks like to flaunt more locations, some credit unions like Hughes Federal Credit Union actually offer more branches for you to access your funds. Thanks to the CO-OP Shared Branch and ATM Network, members have access to over 5,000 branches from coast to coast, beating big banks like Wells Fargo and Chase.
Similar to banks, credit unions also offer online and mobile banking, allowing you to bank anywhere and on your own schedule.
How can I join a credit union?
The eligibility requirements for membership go beyond that of belonging to a certain group that it’s easy to become a credit union member! Each credit union has its own eligibility requirements but you can usually become a member if you live or work in a specific area or belong to certain groups or organizations like labor unions or hospitals. You can also become a member if one of your family members belongs to the credit union.
Membership at Hughes is open to anyone that lives, works, worships, or attends school in Tucson, or through other affiliations. Even if you don’t meet these requirements, there are still other ways to become a member. For instance, Hughes allows you to become a member by making a small donation to one of its community Special Interest Groups like the Tucson Audubon Society.
Becoming a member of a credit union usually entails a small deposit into an account which is known as the Main Share Account. This savings account establishes your membership and represents your share of the credit union.
Ready to make the switch?
Credit unions began with the purpose of serving the underserved and working within the community to pool resources to help one another. This purpose still holds true today. If you’re looking to bank at a financial institution where your interests come first and get more out of your money, here’s what you’ll need to join Hughes:
- Your Social Security Number
- A valid form of identification (U.S. Driver’s License/ID or U.S. Passport with Signature)
- Information for funding your new account (existing Hughes account number, account number, and routing number from another financial institution, or a credit/debit card)
- Your previous address (if at current address less than two years)
- If applying for a joint membership/account, the secondary applicant's information
- A minimum deposit of $50 into your main share savings account