You may think that a credit union and a bank are the same regarding your banking needs. While both banks and credit unions offer a variety of financial products, including saving accounts and certificates of deposit, there are some distinct differences between the two.
Being “member-driven” versus “stockholder-driven” as a business model
The main difference between banks and credit unions is that banks are typically stockholder-driven entities with “customers,” while credit unions are member-driven organizations. At a credit union, you are referred to as a “member” because it is a financial cooperative owned by its members. Profits generated are returned back to its members through higher dividends and better loan rates.
“The relationships we cultivate with our members go beyond transactional,” said Robin Tooms, chief marketing officer for Members Choice Credit Union, a full-service financial institution in Houston, Texas. “We understand how important it is to reach your financial goals and strive to give our members the tools they need to do just that. We are here to support our members to achieve financial well-being and are committed to do our utmost to help them succeed.”
Advantages of joining a credit union
Because credit unions are mission-driven financial cooperatives, they exist to help their members, not shareholders. As a result, credit union members experience a range of benefits, including:
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Higher savings rates and lower interest rates: Credit unions tend to offer a higher annual percentage yield (APY) for their members, allowing them to grow their savings at a faster rate. They also tend to charge lower interest rates, making it more affordable to borrow money. If you want to purchase a home or a vehicle in 2023, joining a credit union might be the right choice.
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Lower fees: Generally speaking, credit unions charge less in fees. For example, they do not usually charge a maintenance fee for having a checking account and don’t require a minimum balance. The fees are not buried in the fine print and are shared upfront when someone opens an account.
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Personal touch: Credit unions are usually localized to a particular region and, for this reason, are able to offer more personalized service. They have a greater ability to forge relationships to help members realize the types of services they need to experience their financial goals.
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Member-centric programs: Credit unions often devise member-centric programming. For example, Members Choice Credit Union launched the “Helping Heroes” Savings Program to provide additional member benefits to individuals working in heroic professions such as education, law enforcement, first responders, healthcare and military. The credit union also offers member-only savings (up to 50%) on various products and services.
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Flexibility on credit scores and creditworthiness: Banks often have less flexible underwriting because they do not have the same member-driven mandate as credit unions. If you have a blemish on your credit report, you may have better luck getting approved for a credit union loan than a bank, as a credit union may take the time to consider other creditworthiness factors.
People-helping-people philosophy
Credit unions operate on a “people helping people” philosophy, offering lower interest rates on loans, higher yields, on savings, and more personalized service. They also provide their members with an array of free financial education that you may find beneficial.
Regardless of what stage of life you are in, credit union membership has its advantages and might be exactly what you need to realize financial wellness.
To learn more about Members Choice Credit Union and its programs, visit mccu.com.
