What Is a Credit Union and How Is It Different From a Bank?
Many people use the terms “credit union” and “bank” interchangeably, but they are not the same type of financial institution. Understanding how they differ can help you make informed decisions about where to manage your everyday financial needs. In this guide, we explain what a credit union is, how it operates, and how it compares to a traditional bank, with local context for readers in Atlanta, GA.
What Is a Credit Union?
A credit union is a not-for-profit financial cooperative that is owned and governed by its members. When you open an account at a credit union, you become both a customer and a part-owner of the institution. Unlike banks, which are typically owned by shareholders, credit unions exist to serve the people who use them.
Credit unions provide many of the same general financial services people expect from a traditional financial institution, such as savings accounts, checking accounts, and loans. However, their purpose and organizational structure are fundamentally different.
How Credit Unions Work
Credit unions operate on a member-based model. Each member has equal ownership, regardless of how much money they have on deposit. Members often have the opportunity to vote on leadership and participate in certain governance decisions.
Because credit unions are not-for-profit organizations, any income earned beyond operating costs is typically reinvested into the institution. This reinvestment may support improved services, financial education, technology upgrades, or community involvement. While credit unions operate with many of the same regulations and oversight as banks, their mission centers on service rather than shareholder return.
Why a Credit Union Is Not a Bank
Although credit unions and banks both offer financial services, they differ in important ways. The most significant distinction lies in their purpose and ownership.
Banks are generally for-profit institutions that aim to generate earnings for investors. Credit unions, on the other hand, are not-for-profit cooperatives focused on serving their members. This difference in structure influences how each institution sets priorities, interacts with customers, and supports its community.
Another important difference is governance. Bank customers do not typically have voting rights or a role in leadership selection. Credit union members often do.
Credit Union vs Bank: Key Differences at a Glance
The differences between credit unions and banks can be summarized across a few key areas:
Ownership: Credit unions are owned by their members, while banks are owned by shareholders.
Purpose: Credit unions operate as not-for-profit organizations focused on service, while banks operate to generate profit for investors.
Governance: Credit union members may participate in voting and leadership selection; bank customers generally do not.
Community Focus: Credit unions often have strong ties to specific areas, employer groups, or organizations.
Institutional Goals: Credit unions typically prioritize long-term member value over quarterly profit performance.
Who Can Join a Credit Union?
Unlike banks, which are typically open to the general public, credit unions serve people who meet certain eligibility requirements. These requirements are known as a “field of membership.” Eligibility may be based on location, employer, family relationships, or community affiliation.
For individuals in the Atlanta, GA area, local credit unions often make membership available through geographic or community-based qualifications.
Why Many People in Atlanta Choose Credit Unions
In communities like Atlanta, many people are drawn to credit unions because of their local roots and community-centered mission. Credit unions often focus on building long-term relationships rather than emphasizing transactional interactions.
Community involvement, financial education initiatives, and local partnerships are common among credit unions. This approach can appeal to individuals who value a more personal connection with their financial institution and an organization that reinvests within the community it serves.
Common Myths About Credit Unions
There are several misconceptions about credit unions that sometimes prevent people from exploring them as an option.
One common myth is that credit unions are only for certain professions or groups. While some credit unions are employer-based, many now serve entire communities.
Another misconception is that credit unions offer fewer services than banks. In reality, most credit unions provide a broad range of everyday financial services similar to those offered by traditional banks.
Some people also assume that credit unions are less secure. In fact, credit unions operate under established regulatory oversight and safeguarding systems designed to protect members.
How to Decide If a Credit Union Is Right for You
Choosing where to manage your financial life is a personal decision. Some people prefer large national institutions, while others value local, community-based organizations. When comparing a credit union to a bank, it can help to consider:
Whether you value community involvement
Whether you want a membership-based structure
Whether local decision-making matters to you
Whether educational resources and relationship-based services are important
Understanding how each type of institution operates allows you to choose the option that best aligns with your priorities and preferences.
Learning More About BOND Community FCU
BOND Community FCU is a member-owned financial cooperative that serves the Atlanta area. As with many credit unions, its focus is centered on its members and the community it supports.