Spoiler alert: they’re not! They’re just a little different.
There’s a pervasive myth that credit unions are inherently better than banks. While they operate differently, their ultimate purpose should be the same- to make quality loans to people that need them the most.
It’s understandable why people make this assumption about credit unions, though, as the most distinct difference between the two is that banks are owned by shareholders, while credit unions are owned by their members. This puts pressure on banks to generate more income than credit unions, meaning they often have higher fees and interest rates on loans than credit unions. This is what people mean when they say banks are for-profit and that credit unions are nonprofit organizations.
Another distinction often made between credit unions and banks is that credit unions are often less convenient than banks, and when comparing credit unions to the biggest banks, this may be true. National and multinational banks have more resources, allowing them to constantly update their tech and open more branches and have an ATM in every retail area. But the “mega banks,” as we call them, are some of the worst banking options you can choose for a wealth of reasons. Credit unions may have fewer resources on the whole, but many still choose to invest in accessibility through technology. Generally, smaller banks and credit unions will be a little less convenient than larger ones, but they also are more likely to invest your deposits in your community.
Because so many credit unions are quite small, they may not have the resources to make the kinds of loans which we look for in Better Banking Options. Housing and small business loans often require more capital than smaller credit unions have access to, so some may make mostly commercial and alternative loans. Nonetheless, these are still necessary kinds of loans, and having access to credit unions that provide them can keep their customers from being taken advantage of by payday lenders.
One last distinction to make between banks and credit unions is that banks accept all customers while credit unions may have eligibility requirements. For example, there are many credit unions which only accept members from a certain area or only those employed by a particular company. When you’re looking at moving your money to a credit union, just make sure that you fall within their terms for eligibility, usually stated clearly on their websites.
As you can see, to say ALL credit unions are better than ALL banks is just not true. When choosing a Better Banking Option, the best course of action is to compare and contrast individual banking institutions for the features that you most want and need. Everyone’s particular needs will be different.
That’s why we created our search engine--so that anyone could look up their area and see all the credit unions and the banks available to them. We rank these options based on our metrics, which value housing and small business loans, branches in low-income census tracts, and a local focus. These are the things which we think are the MOST important in a bank or credit union, because they help build generational wealth in disinvested neighborhoods. However, while these things are incredibly important to the health of our local economies, you should always look for Better Banking Options which will work for YOU.
So what if you need the convenience of a big bank, but still want to invest in a local credit union which does a lot of quality lending? We recommend maintaining an account at both banks, and keeping most of your money where it will do the most good for your community. You can easily transfer money as you need it into your more accessible account. Check out our article on long-distance banking for more tips on how to support a local credit union or bank even if you travel often or live far away.
It would definitely be simpler if we could say that credit unions are ALWAYS better than ALL banks, but it requires a little more nuance than that. When looking to make the biggest difference with your deposit, just look for any banking institution that suits your needs that is also making quality loans. Our search engine makes it a lot easier, but it will always require a little independent research. Consider starting your search for a Better Banking Option today!