What is a key difference between a bank and a credit union?

A fundamental distinction between banks and credit unions lies in their profit orientation and ownership structure. Banks operate as for-profit institutions, meaning their primary goal is to generate profit for their shareholders. This typically results in a focus on maximizing revenue through interest on loans and various fees.

In contrast, credit unions are structured as non-profit organizations, owned by their members. This non-profit status means that credit unions often prioritize the financial well-being of their members over profit generation. Any surplus earnings are typically reinvested into the credit union or returned to members in the form of lower fees, better interest rates on loans, and higher returns on savings.

This ownership and profit motive is critical in understanding the different services, fees, and interest rates that these institutions offer to their customers.