Although banks and credit unions have similar financial products and services, there are characteristics that allows one institution to offer better rates. Credit unions go beyond standard banking, offering lower fees, higher dividend rates on savings accounts, and more personalized service. This makes them an ideal choice for people who are looking for better rates.

In this blog we’ll cover:

• Different characteristics of credit unions and banks
• Credit union distinctions that typically make their rates better
• How you can switch from a bank to a credit union

Are Credit Unions' Financial Products Comparable to Banks?

When it comes to your unique financial situation, finding banking products and services that suit your needs are important for achieving your financial goals. A credit union prioritizes your needs and doesn’t believe in a one size fits all model. While you’ll find that both banks and credit unions provide checking and savings accounts, debit and credit cards, as well as different lending options, a credit union's ability to offer superior rates boils down to their primary purpose – people helping people.

Reasons Why Rates Are Typically Better at a Credit Union

Credit unions have an unparalleled business model – not-for-profit financial cooperatives that advocate financial education, smart saving habits, and sound credit used to enrich the lives and financial well-being of their member-owners. They may look like banks, but operationally, they are quite different.

Not-for-Profit Financial Cooperative vs. For Profit

A credit union is a not-for-profit cooperative, meaning it cannot be privately owned or issue stock. At a credit union, proceeds earned above expenses are returned to members in the form of lower fees, lower loan rates, and higher dividends on savings accounts. Without the pressure to maximize profits, credit unions are free to prioritize service over earnings which is what allows them to offer better rates.

Banks are for profit, either privately owned or publicly traded. For profit organizations are primarily focused on maximizing profits in which a portion is paid back to stockholders for their investment in the organization.

Lower Operating Costs

Both banks and credit unions must generate income to cover operating costs otherwise they wouldn’t be able to offer financial products or services. Credit unions often operate on leaner budgets, allowing more savings to be passed to members. Because of this, credit unions are able to provide cost effective solutions that banks cannot, making banking affordable for their member-owners.

Members vs. Customers

Credit unions have member-owners; everyone with an account is an owner with equal stake in the organization. Banks have customers; people who have a business relationship with the financial institution and do not have equal ownership in the organization. Banks are owned by shareholders, a small group of investors who own stock in the business. In return for their investment, dividends or a portion of the profits, are paid back to them regularly throughout the year.

Stewardship vs. Management

A credit union is governed by a volunteer Board of Directors elected by its members. The Board's main purpose is to safeguard the credit union and its members. As stewards for the organization, they're responsible for protecting the credit union’s long-term sustainability and ethical considerations. Banks are governed by a paid, elected Board of Directors chosen by stockholders. They are legally bound to make decisions in favor of stockholders, not customers.

The Credit Union Difference

Credit unions are committed to service and have been since their inception in 1852. Their concept is simple: People working together and pooling their savings to create a valuable credit resource not otherwise available to them. This dynamic principle of the early credit union movement is still very much alive today and is centered on the values of cooperation, equality, and equity. Credit unions are about people helping people and putting them first, not profits.

• Democratic Control: One member, one vote.
• Open Membership: Membership fosters community.
• Non-discrimination: All are welcome at a credit union.
• Distribution to Members: Profits are returned to member-owners, not stockholders.
• Building Financial Stability: Credit unions are reliable and build their reserves to ensure continued service to members.
• Service to Members: Credit union services are intended to improve the economic and social well-being of members.
• Cooperation Among Cooperatives: Credit unions cooperate with one another to best serve the interest of their members and communities.
• Social Responsibility: Credit unions seek to bring about human and social development. Approximately 1/3 of American credit unions are designated low-income.
• Ongoing Education: Credit unions provide financial literacy education to help enrich the lives of their members.
  
  

Community Impact

Credit unions also place a heavy focus on community and creating positive impacts in areas they serve. Peach State’s philanthropic arm – the Peach State F.C.U. C.A.R.E.S. Foundation – focuses on charitable giving and supporting education, the arts, local non-profit organizations, and more. 

By choosing a credit union, you’re not just improving your financial future – you’re also supporting a community-focused institution dedicated to helping others succeed. To learn more about how you can help or to make a donation, please visit peachstatefcu.org/cares.

For Better Banking and Better Rates Join Peach State!

Credit unions’ not-for-profit structure and member-centric mission make them the natural choice for better rates, affordable financial solutions, and personal banking. Joining a credit union like Peach State is simple. Visit peachstatefcu.org/membership for more information on eligibility requirements or visit a branch near you. Once you’re a member, you’ll have access to the full range of financial products and services designed with your best interests in mind.

Whether you’re looking to borrow affordably, save money, or grow your savings, Peach State is here to help you achieve your financial goals.