Fact or fiction: Credit unions vs. banks

Are credit unions easy to join? What are some differences between credit unions vs. banks? We’re answering these and other common questions about credit unions.

Banks and credit unions were created to help people manage their money. But that doesn’t mean both types of financial institutions are cut from the same cloth. From their core values and philosophies to their loan rates and consumer benefits, there are some big differences between big banks and credit unions.

Here, we’re dispelling a few myths about credit unions by separating fact from fiction:

Fact: Credit unions have been around for a long time.

The first U.S credit union was St. Mary's Cooperative Credit Association in Manchester, New Hampshire, which opened in April of 1909.¹ Desert Financial (originally Arizona Educational Association #1 Federal Credit Union) was chartered just 30 years afterward, making us one of the earliest Arizona credit unions!

Fiction: Credit unions are just like banks.

While both banks and credit unions help you manage your finances, their philosophies couldn’t be more different! Credit unions like Desert Financial are not-for-profit, while banks are typically for-profit organizations. That means banks are focused on earning more money for their shareholders, whereas credit unions give back to their members, the community and their team.

Fact: You are more than a member, you are part owner.

It sounds crazy, but this one’s true! While banks have shareholders, credit unions are owned by their members. When you join a credit union, your opening deposit ($25 at Desert Financial) is your share in the credit union. As a member, you have exclusive access to the credit union’s products and services, and other perks!

Fiction: Credit unions are hard to join.

Part of what makes a credit union unique is that its members all share some sort of common bond, known as the credit unions “Field of Membership” or “FOM”. A credit unions FOM is the legal definition of who can join. The common bond could be your employer, the geographic location of where you live, work, worship or attend school, or membership in a group such as a labor union. Not to worry though, if you don’t happen to fit into a particular credit union’s FOM, but have a family member who does, you too may be eligible to join!

Desert Financial services all of Arizona (except Apache, Graham, Greenlee and Santa Cruz counties) with a field of membership open to anyone who lives, works, worships, volunteers, or attends school in our membership coverage area, or is an immediate family member of a current Desert Financial member!²

Fact: Credit unions often have lower loan rates than banks.

On average, credit unions offer lower rates on home equity, auto purchase, traditional home and home refinance loans. They also tend to pay members higher interest rates on deposit accounts like savings, money markets and savings certificates, so you can make more money on what you have. The NCUA provides a Credit Union and Bank Rate comparison of deposit and loan rates, so you can see how they stack up.

Fiction: Your money isn’t as secure at a credit union.

The money within your checking account, savings account and other deposit accounts are insured for up to at least $250,000 per individual on the account at both banks and credit unions. The difference is simply in which federal organization insures your money. Credit unions like Desert Financial are insured by the National Credit Union Administration (NCUA), while banks are insured by the Federal Deposit Insurance Corporation (FDIC).

Fact: Credit unions can help you save money.

Credit unions spend a lot of time finding new ways to give back to their members. Because your success is their success, many credit unions provide financial education resources to help you save money and manage debt.

Fiction: Credit unions aren’t as tech-savvy as banks.

It turns out that credit unions not only have the same online and mobile banking technologies as the big banks, they actually have better ones. Credit unions also offer fraud protection technologies such as text alerts for unusual transactions, plus online bill pay services, free budgeting tools, financial literacy webinars and other tech to make managing your money easier.

While they serve the same function, there are many distinct differences between banks and credit unions. Because they are member-owned cooperatives, credit unions put their members first! Credit unions are also known for giving back to the community through volunteering, scholarship programs, fundraising, donations and more. At Desert Financial, that’s what we call  Sharing Success — and it’s one of the primary reasons we’re proud to be a credit union!