Credit Unions vs. Banks:
What’s the Difference?

Credit unions and banks may seem very similar, and in some ways, they are. They offer most of the same products and services – checking and savings accounts, loans, credit cards, etc. But the differences in organizational structure make it possible for members of a credit union to enjoy lower fees, lower loan rates, and higher dividends on savings and deposits.

Member Service

Because credit unions are smaller and more localized than national banks, you can expect a personal, hands-on approach. Your local representatives may get to know you personally and spend more time helping you with any questions or concerns you have about your finances. You’ll also be able to speak directly with a representative when it comes to qualifying for a loan, which can help you secure the best rate for your financial status.

Qualifying for Credit

At a bank, service is often less personalized and more automated. It may be more difficult to get hands-on customer service and customized solutions. Qualifying for loans and credit lines will be mostly, if not entirely based on your current credit score, regardless of any outstanding factors that might warrant an exception in the eyes of a credit union.

At a credit union, you may have the opportunity to get approved based on unique circumstances that a bank would not typically consider.

For-profit vs. Not-for-profit

Banks are for-profit institutions, which means their goal is to generate profit from their customers and transfer earnings to a small group of stockholders. Customers of banks do not have ownership or stock in the company by default (though they may choose to invest). This means they are subject to whatever rates and fees are designated by the company in order to maximize profits, often leading to higher rates and fees than credit unions. There are also no dividends rewarded as the company experiences profits.

On the other hand, credit unions are owned by and designed to serve their members. Each member has a voice in the way the organization is run, as they get to elect Board Members who will guide the credit union’s policies. Because the credit union exists for the benefit of its members, profits are returned to the members in the form of better rates and lower fees, and higher dividends on their savings.

Credit Union VS. Bank Mortgage Loan

The fees charged by banks are typically higher than those charged by credit unions for the same type and size of loan. Since credit unions are not-for-profit, they return earnings to members in the form of better rates or reduced fees. All this means that your credit union mortgage loan will likely come with lower closing costs and origination fees.

Credit Union VS. Bank Auto Loan

Credit unions offer similar financial products as banks, but they are more affordable. Most people consider a credit union for car purchases because the rate is normally lower than dealer financing and because commercial banks are normally a percentage point or two higher than credit unions.

Credit Union VS. Bank Interest Rates and Fees

Generally speaking, credit unions offer higher dividend rates and lower loan rates. This means your savings will grow faster and you will owe less money over the term of your loan. Credit unions also tend to charge less in fees and require no or lower minimum deposit requirements.

Lower Fees

At PFCU, we pride ourselves on offering the lowest fees possible to our members. Click here to view our fee schedule.


"I’ve been a credit union member all my life. Nothing compares to great service and even better rates!”

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