Difference Between Credit Union and Bank
Anyone is quite familiar with the financial system. We store our savings here. Our salaries are also deposited there. In case we desire to buy a car or a property, we take out loans from the financial system. So, the financial system forms an integral part of our lives.
It is better to store our finances in banks. It allows us to be assured that our money is in good hands. When we store our money in the financial system; the system is also able to lend money to other people when they need. It is how the system works.
Very recently, there has been a new concept of credit unions. We had been using the terms without knowing the difference between credit union and bank. While we may consider that both are related to finance and would have the same meaning; that is not the case. Yes, there is a difference between bank and credit union. It would be incorrect to assume that both these terms are identical when there is a subtle difference in their meaning. In this article, we will find out what’s the difference between a credit union and a bank.
Definition of Credit Union
While learning the difference between a credit union and a bank, let us first learn about the former. The essence lies in the name itself. A credit union is a non-profit organization that helps its members by providing a variety of financial services. The members of the credit union collect the money and lend it to members when they need it.
It allows people to better save their money. In this case, you will need to obtain a membership by fulfilling some criteria that may be set over time. You deposit a sum of money, and you will get some shares of the entity. The more money you deposit; of the more shares you will get in equal proportion. Depending on the privileges, you can also vote on the selection of the board members. The credit union is said to offer a rate of return that is above the market.
Definition of Bank
We will now learn more about the difference between a bank and credit union. In fact, the banking system is thriving because of the banks. They are organized and they are all for profit. They can be owned by the government or by the private sector. They perform a large number of functions; the basic ones being to store our money at a slightly lower rate and to lend money to people. The interest rate for borrowing money is rather high. It also acts as an intermediary by offering mutual funds and different types of insurance policies to its clients. It also acts as an agency that trades stocks and bonds from time to time. Sometimes, they also deal in bonds.
The banking system also allows direct debit, which will allow you to pay your bills online very easily. Banks also offer a wide range of services to their customers. They even provide cash at your home if you are a preferred customer. ATM facilities and lockers are quite well known and very popular too.
Credit Union vs Bank Comparison Table
Let us now have a look at what’s the difference between a bank and a credit union in a tabular form.
|Basis of Comparison||Credit Union||Bank|
|What it means||It is a close-knit community where members store their money, which is then provided to members at low rates||It is an entity that is sanctioned by the authorities to provide financial services to its clients|
|Who deposit the money||The finances are provided by the members||The finances are provided by the clients|
|Type of entity||It is mainly non-profit||It stores money at lower rates but lends at higher rates; thereby making some gains.|
|What is its motto||It strives to provide better service to the members||The underlying motive is to make profit|
|Reviews||It has fewer services but lends at lower rates||It provides a wide range of services but lends at higher rates|
Conclusion of Main Difference Between Credit Union vs Bank
We have tried to provide details about the difference between commercial bank and credit union in simple terms. While a credit union is formed by members and keep their money that is lent at low rates, a bank offers a wide range of services and lends at higher rates.
We sincerely hope that you have been able to comprehend the difference between a bank and a credit union. We look forward to hearing from you.