How is a credit union different from a bank? It’s easy to get confused about the topic. A credit union does all the same things that a bank does, so why does it have a different title? While credit unions and banks work similarly, they have a few key differences. Here are the things that set credit unions and banks apart from one another.
Not-for-Profit vs. For-Profit
Here’s the key difference between banks and credit unions: Banks are businesses, while credit unions are not. Banks exist to make a profit. Every bank decision comes down to whether that decision will make money. That’s why it can be tough to get a loan from a bank. The owners must consider whether your loan will make money for them. A credit union, on the other hand, is a not-for-profit organization. They exist to help their members. Any profit that they make must go right back into the organization. As a result, credit union members often deal with fewer fees, and many business owners have an easier time getting a loan from a credit union than from a bank.
Membership vs. Participation
Another difference comes from how people begin using a bank or a credit union. At a bank, anyone who meets the minimum financial requirements can use their services. Credit unions usually require some form of connection instead. For example, some credit unions only serve specific professions. Some serve certain geographic communities. Many of these credit unions are available to the family members of their current users. Don’t let this fact scare you away from credit unions, though. The US has plenty of credit unions, so finding one that fits into your demographics may be much easier than you think.
Member-Owned vs. Individual Ownership
Finally, as non-profit organizations with members, credit unions are member-owned. Banks, being businesses, are usually owned by just one person or a few people. At credit unions, members have a say in the organization. Credit unions have leadership, of course, but that leadership will keep the other members up-to-date on any possible changes. In banks, decisions usually boil down to the ownership.
Finding What Works for You
Are you deciding between banks and credit unions for your business needs? Can’t decide where to start? BundleFi can help. We connect business owners with small community banks and credit unions. Contact us today to get started. We’ll help you find the perfect match.