Credit unions are not-for-profit organizations that serve their members. They accept deposits, fund loans, and provide financial services. These institutions are member-owned, which is why you must become a member to join, and provide a safe place to deposit and borrow at more affordable rates.

Credit unions function to promote the well-being of their members. When the credit union makes profits, it is returned to the member/owners. Members of a credit union all have something in common, like geographic location, employer, family, or organization. Usually, credit unions have a volunteer board of directors that is elected by members to manage the credit union, so your voice is heard at these institutions.

The Differences

Credit unions are usually much smaller than most banks because they are designed to serve a specific community or group of people. Even though credit unions are smaller, they can have a broad reach with their ATM networks. Credit unions and banks typically offer the same services like lending money, accepting deposits, creating accounts, and other financial services. The key differences are how the two institutions make a profit and what they do with it.

Banks function to produce profits for their shareholders, while credit unions are not-for-profit and serve their members. Banks can have higher fees, lower returns on deposits, and higher lending rates because they need the profits to fund their bottom line. Credit unions must make enough money to cover their operations, but they do not need to generate profits which allows them to offer lower fees and account minimums, higher rates on savings, and lower borrowing rates on loans.

The Bottom Line

Banks are for-profits and credit unions are not-for-profits. Because credit unions serve their members, they usually provide better customer service and take the time to understand your situation. Typically, credit unions offer higher interest rates on deposits and lower rates on loans and fees.

DEXSTA | Federal Credit Union

We are committed to the people-helping-people philosophy. In a time when banks are claiming record profits, we remain a not-for-profit alternative for all of your financial needs. Our goal is to provide the highest level of service with competitive rates. Contact us, visit us online, or stop in one of our DEXSTA Federal Credit Union branches.