It’s often the big life decisions that prompt opening a new bank account, whether it’s a cross-country move, opening a new business, or anything in between. Depending upon the circumstances or the geographic location, maintaining an account at a large financial institution may not be feasible or desirable. If that’s the case, the alternative is to choose a smaller, regional option—a community bank or a credit union. Each offer a great customer-centric focus with many similarities between them yet they each feature differences worth comparing.
A community bank is often a smaller, regional financial institution operating as a for-profit entity to serve customers within a local community. Although the main focus is placed on community investment, bank executives are responsible for reporting to investors as opposed to a board of directors or member-owners.
The perks of using a community bank include developing relationships with bankers who will understand your financial needs and provide helpful solutions, paying lower fees than those imposed by larger financial institutions, and patronizing a bank that boosts local economic activity by lending to businesses and individuals in the community.
A credit union is also a smaller financial institution; however, it operates as a non-profit entity and serves members who share a common bond (occupational, geographic, etc.) Each member-owner has voting rights for major decisions affecting the credit union, under the governance of a board of directors.
Like community banks, credit unions strive to understand their members’ financial needs and provide helpful solutions. Additionally, they are able to offer better savings and interest rates than most banks, and they charge lower fees.
Despite a solid list of similarities, here’s a side-by-side comparison of some very distinct differences between a community bank and a credit union.
Choosing between a community bank or a credit union can be difficult but weighing your unique circumstances against the product and service offerings of each is a great place to start. There are also lots of tools available to help you find a new financial institution, like this community bank locator and this credit union locator.