Banks Vs. Credit Unions–What’s The Difference?


Customers regularly report much higher satisfaction with credit unions than banks. This lead has grown by leaps and bounds in recent years and it’s easy to understand why if you know the differences between the two.

Banks are owned by shareholders and provide their services to customers so that shareholders earn profits. By comparison, you join a credit union to become a member-owner and gain access to apply for its financial products. Since credit unions are not-for-profit, any earnings translate into better rates for members.

This basic difference forms every aspect of a credit union like PenFed.


You become a member of a credit union to access its financial benefits. At a credit union like PenFed, you open a Share Account (savings) when you join. The first five dollars deposit into that Share Account represents your financial share of the institution; every other member also holds a share.

Your membership delivers a huge variety of benefits. Incredible rates, outstanding financial products, and even discounts from companies that offer special pricing to members.

But these benefits belong to you expressly because you’re a member, and all members can access them equally.

You get a vote

Banks are owned by shareholders, which operate the institution how they see fit. Customers merely use a bank’s products; they have no direct influence or say in how the bank is operated.

Credit union members elect their volunteer Board of Directors in a democratic election. Each member gets one vote. No matter how much money a member keeps in the credit union, or how many financial products that member uses; every member gets a vote.

Democratically elected Board members don’t get paid for their service to the credit union. It’s purely a volunteer position and any member can generally be nominated to serve.

Customer focused operation

At PenFed and other credit unions, members are always the top priority. When determining where to allocate resources, spend funds, and manage costs, credit unions constantly keep the members’ interests in the forefront.

Membership is more than just a vague concept. Members are the owners and the entire reason for a credit union’s existence. They are real people who trust the institution to keep their money safe and deliver valuable financial products.

Field of membership

Banks service customers, who can come from nearly anywhere. Credit unions serve members who belong to a select community referred to as a “field of membership.”

Some credit unions serve citizens who live in specific counties while others might be dedicated to employees at particular government agencies. For example, there are hundreds of ways for someone to become a member of PenFed. PenFed draws its membership from our nation’s government agencies, members of associations, those in military services, donors to charitable organizations, and their families.

Why we do what we do

The fundamental difference between banks and credit unions boils down to one sentence: Banks exist to earn profit while credit unions serve their members. The credit union movement’s motto is “people helping people.” Everything about a credit union is created and defined by its service to its members, from how its Board of Directors is elected to why its rates are so fantastic.


Equal Housing Lender
The credit union is federally insured by the National Credit Union Association

Posted in: Credit Unions