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What’s The Difference Between a Credit Union and a Bank?

by Eva 9 Comments

What's the difference between a credit union and a bank and why should a teen care? Take a look at why many teens would benefit from a credit union!

It really wasn’t until I started this website that I more fully understood what a credit union is and how it is different from a bank. On the surface they seem almost the same. They offer checking and savings accounts, ATM cards, credit cards, all the other basic things you would expect.

difference between a credit union and a bank

 

The main difference is that a credit union is owned by it’s members – the people who have accounts at the credit union.  A bank is owned by investors. These people expect to earn money in dividends from the bank. Since a credit union does not have to pay dividends to investors it offers its services for lower fees and also offers higher interest rates when you have a checking or savings account with them.

Another benefit of a credit union is that when you take out a loan, the interest rates you pay are normally lower than those at a bank. This is one of the main reasons my parents have been credit union members for so many years. They have purchased two homes and two cars through a credit union because the interest rates were so much lower than those at a bank.

Usually credit unions are in a small local area and are not nationwide. This could be seen as a drawback. Many banks are nationwide which means that finding a branch or an ATM machine will be easy even if you are traveling. Fortunately, credit unions have found a way to work together to make traveling easy for their members. You can access your credit union account from almost anywhere in the U.S. and even in some foreign countries. Most credit unions are ‘shared service centers’ which means you can go into any credit union and have access to your account. You can do things such as:

Make deposits and withdrawals

Make loan payments

Make transfer between accounts

Get a cash advance or check your balance

If you want to take advantage of this service you must know the name of your credit union (duh!), your account number, and have a picture I.D. with you. And yes, I realize that most of you would know that but some of us need reminders…

What's the difference between a credit union and a bank and why should a teen care? Take a look at why many teens would benefit from a credit union!

Now that you can do just about everything online, including paying bills, transferring money, checking on your account balances and such, I don’t really see the need for most people to go into a branch in the first place. But that’s me. My mom says that she still likes to go into a branch especially when she has a question or wants to do something like apply for a loan or open a new account.

I recently opened an account at 121 Financial Credit Union. You can read about that experience HERE. I highly recommend checking out a credit union near you if you are planning to open an account or move your existing accounts.

Starting an account at a credit union means that you will pay less in fees, earn more interest from your accounts, and pay less interest if you get a loan. Three very good reasons to go with a credit union instead of a bank.

Be sure to check out 121′s Facebook page!

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Comments

  1. Mel

    March 10, 2014 at 8:22 pm

    I was totally unaware that you could also get great deals of mortgages and loans. I thought they just usually had better interest rates for savings accounts. Thanks for the heads up, Eva!

    1
    Reply
    • Eva

      March 10, 2014 at 9:48 pm

      Sure thing! The more I learn about credit unions the more convinced I am that they are a great choice for most people.

      1.1
      Reply
  2. Andrew

    March 15, 2014 at 10:21 am

    I love my credit union! Mine offers ATM fee refunds. So I can use any ATM in the world and not worry about the fees. This made it easier to deal with the lack of global branches.

    2
    Reply
    • Eva

      March 16, 2014 at 1:41 pm

      I didn’t think of that Andrew. Not sure if all credit unions offer that but I will check it out. Thanks for commenting!

      2.1
      Reply
  3. Nicole Robinson

    March 18, 2014 at 11:57 am

    Credit unions are great. My credit union has an annual meeting, usually at the zoo or some other fun location. It almost feels like a family reunion because you see the same people each year.

    3
    Reply
    • Eva

      March 19, 2014 at 3:10 pm

      That sounds like fun! Thanks so much for stopping by!

      3.1
      Reply
  4. Brian

    April 11, 2014 at 12:05 pm

    Just a slight correction, it’s not most credit unions, but a growing number are on the Shared Branch Network. Over 1,800 credit unions work together, cooperate, to share their locations (over 5,000) so that members can the same conveniences as big banks. You can find locations or if your credit union is on the Network at http://www.co-opsharedbranch.org

    Great post!!!

    4
    Reply
    • Eva

      April 14, 2014 at 2:12 pm

      Thanks Brian! I thought most were but I am glad for the correction. The more I learn about credit unions the more I like them and everything they do in local communities!

      4.1
      Reply

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Hi guys, I’m Eva!

Welcome to TeensGotCents, my name is Eva Baker and I founded this site when I was sixteen. I'm a complete money nerd and I love helping teens learn how money works. Also, I watch too much Netflix. Although I still have a lot to learn about personal finance I hope you will use my successes and failures to help reach your own goals whether you want to go to college debt free, get a part time job, work on a fun DIY project that will save you money or just read about ways you can learn to manage your money well as a teen. So glad you're here! Read more about my story here.

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