Are Credit Unions Better than Banks? AVANA CUSO Answers

AVANA CUSO has more than two decades of experience providing participation loans to credit unions and their borrowers. With such extensive experience working with credit unions, AVANA CUSO understands the major advantages such institutions offer. In addition to exceptional customer service that aligns with AVANA CUSO, credit unions provide top-tier benefits to their members, ranging from lower fees to greater returns. When it comes to choosing a financial institution, borrowers and savers alike often face the decision of whether to bank with a traditional bank or a credit union. Both options offer a range of financial services, but credit unions provide a unique set of advantages that can make them a better choice for many consumers. In this blog, we’ll answer your question “Are Credit Unions Better than Banks” and compare credit unions and banks across key factors to help you determine which is right for you.

Credit Union Definition: What is It?

The World Council of Credit Unions defines a credit union as “a customer/member-owned financial cooperative, democratically controlled by its members, and operated for the purpose of maximizing the economic benefit of its members by providing financial services at competitive and fair rates.” The business model is fairly simple: members pool their money together by buying shares in a cooperative to provide loans, checking accounts, savings accounts, credit cards, and other financial products.

What to Consider When Choosing a Bank or Credit Union

When choosing a bank or credit union, there are several factors to consider:

• Structure: Banks are for-profit financial institutions while credit unions are not-for-profit.
• Deposit Account Rates & Rates on Loans: Traditionally banking typically has higher interest rates.
• Deposit Insurance: The Federal Deposit Insurance Corporation (banks) and the National Credit Union Administration (credit unions) insure up to $250,000 per account.
• Customer Service: Because credit unions are community-centric, they typically offer more personalized customer service.
• Physical Locations: National banks offer more branches than credit unions, which are often more locally focused. However, many credit unions are members of the CO-OP Shared Branch network which allows members of one credit union to perform a range of transactions at another credit union.
• Technology & Convenience: Although bigger banks are often quicker to deploy new tech, credit unions have caught up to providing convenient apps and banking solutions.

Are Credit Unions Better than Banks?

Overall, credit unions offer more personalization, greater control, and higher returns than banks.

Because credit unions are member-owned, you become a part-owner, meaning you have a voice in how the institution is managed. Members often derive meaning and feelings of connection from being a larger part of a credit union because they share a common bond. This bond is also known as a “field of membership,” which specifically defines a credit union’s eligibility requirements. At some credit unions, eligibility may be based on a shared employer, geographic location, or membership in a particular group, such as a school, labor union, or place of worship.

As a nonprofit organization, credit unions return all profits to members in the “form of reduced fees, higher savings rates, and lower loan rates.” In the spirit of being a nonprofit, credit unions also get involved with the community by providing financial education, building in-school credit union branches, and assisting with small business needs.

Banks are led by corporate owners who expect a certain return on their investment, which can lead to higher interest rates and transaction fees. These financial institutions are also less likely to make exceptions or waive fees. Banks typically offer lower annual percentage yield (APY) on savings accounts.

Because banks are typically national corporations, they don’t offer the same personalized services credit unions are known to provide. With banks, it may be difficult to get in touch with live customer support by calling their 800 number, and—when you have reached them after a lengthy time on hold—they likely aren’t forthcoming with financial education or resources. In comparison, credit unions typically have real people at the other end of phone calls, supplying customers with educational resources and information on the latest rates and accounts.

At a Glance: 9 Reasons Why You Should Use a Credit Union

1. Member-First Ideology

Credit unions operate as member-owned cooperatives, meaning their primary goal is to serve their members rather than generate profits for shareholders. This results in better customer service, personalized financial solutions, and a focus on community well-being. Unlike traditional banks, which prioritize revenue and shareholder returns, credit unions reinvest earnings into member benefits, such as lower fees and higher interest on savings. This member-first approach fosters trust and long-term financial security.

2. Higher Returns on Resources

Because credit unions are not-for-profit institutions, they can offer higher interest rates on savings accounts, money market accounts, and certificates of deposit (CDs). This allows members to grow their savings faster compared to traditional banks, which often provide lower returns due to profit-driven models. Over time, the difference in interest earnings can significantly impact long-term financial goals, making credit unions a smart choice for savers.

3. Lower Interest Rates on Credit Cards & Loans

One of the biggest advantages of credit unions is their ability to offer lower interest rates on auto loans, mortgages, and personal loans. Since they prioritize financial wellness over profits, members benefit from competitive loan terms with reduced monthly payments. Additionally, credit unions often provide more flexible repayment options, making borrowing more affordable and accessible for a wide range of individuals.

4. More Likely to Work with Poor Credit

Unlike big banks that rely on rigid credit scoring models, credit unions take a more holistic approach to lending decisions. They consider factors such as a member’s financial history, relationship with the credit union, and ability to repay rather than just a credit score. This makes credit unions a great option for individuals with less-than-perfect credit who may struggle to secure loans elsewhere.

5. Free Checking Accounts

Many credit unions offer free checking accounts with no monthly maintenance fees, minimum balance requirements, or hidden charges. This helps members save money while accessing essential banking services. In contrast, traditional banks often charge monthly fees for basic checking accounts unless customers meet certain balance or transaction requirements.

6. Lower Fees

From overdraft protection to wire transfers and ATM withdrawals, credit unions tend to charge significantly lower fees compared to big banks. Many even waive fees for certain services that traditional banks would charge for, such as paper statements or cashier’s checks. Over time, these savings add up and help members keep more money in their pockets.

7. More Personalization & Ease of Service

Credit unions pride themselves on delivering a personal touch in their customer service. Unlike large banks where customers may feel like just another account number, credit union staff take the time to understand individual financial needs and provide tailored solutions. Whether it’s assisting with loan applications or offering budgeting advice, members receive a level of service that prioritizes their financial well-being.

8. Online Banking Options

Modern credit unions offer robust digital banking services, including mobile apps, online bill pay, and remote check deposit. While some may assume credit unions lag behind in technology, many have made significant investments in online banking to provide members with convenience and security. Members can easily manage their finances from anywhere, just as they would with a traditional bank.

9. Educational Resources

Credit unions are committed to financial literacy and often provide educational resources, workshops, and one-on-one counseling to help members make informed financial decisions. Whether it’s learning about credit scores, homeownership, or retirement planning, members have access to tools that empower them to take control of their financial future. This commitment to education helps individuals and communities build long-term financial stability.

About AVANA CUSO

Established in 1998 and headquartered in Simi Valley, CA, AVANA CUSO offers competitive and collaborative commercial loans. We partner with credit unions and brokers and connect them to investors across the United States. Additionally, we uniquely support and guide our partners through the entire full lifecycle of loans. AVANA CUSO is a proud member of the AVANA Family of Companies.

Women’s History Month is a time when everyone can honor the legacy and impact of women. In celebration of this important time, our lens is on the vital role women play as entrepreneurs and small business owners. 

In fact, women started 49% of new businesses in the United States in 2021, up from just 28% in 2019. 

AVANA CUSO’s Brianna Vaughan, CUDE, Executive Vice President, Operations points out, “Female business ownership is growing at a quicker rate than ever before, appearing to only gain more strength throughout the pandemic. This not only shows the ambition of women but also their increasing importance to the economy.”

Here we’ll reflect on the history of women-owned businesses in the U.S. and highlight some of the resources available to aid their growth. 

The History of Women-Owned Businesses in the U.S.

The first woman-owned business in the United States dates back to pre-Revolutionary War times. In 1739, Eliza Lucas Pinckney gained control over her family’s three plantation operations in South Carolina when she was just 16 years old after the passing of her mother and father. 

There was a similar pattern that ensued throughout the 18th and 19th centuries as women would inherit businesses from their husbands as they passed away. However, the 20th century saw a distinct shift as women became more independent and direct with their entrepreneurial endeavors. 

This led seamlessly into the World War II era when women joined the workforce in droves, which ended up causing a large push for female entrepreneurship. 

A few decades later in 1988, a study assessed the state of women in business, leading to a report titled: “New Economic Realities: the Role of Women Entrepreneurs.” Following this report, Congress enacted H.R. 5050, the Women’s Business Ownership Act of 1988, which protected women’s equitable access to capital, established Women’s Business Centers and created the National Women’s Business Council (NWBC). 

The Recent Years of Women-Owned Businesses

Taken from a 2020 report by the NWBC, women-owned businesses make up 42% of all businesses in the United States. This represents about 13 million businesses, employing 9.4 million workers, and generating nearly $2 billion in yearly revenue. 

However, even though males are still the majority owners of businesses in the country, gross receipts for women-owned employer firms saw more growth between 2012-2019 than male-owned equivalents – 51.9% growth for women compared to 34.2% for men. 

Plus, since the turn of the 21st century, the number of women-owned businesses has increased by 114%. 

How AVANA CUSO Supports Women-Owned Businesses

It’s clear that the rate of women’s business ownership has benefited from H.R. 5050, which eradicated discriminatory lending practices against women. Prior to this, many states had laws that required women to have a male relative co-sign a business loan. 

Even still, only 27% of women seek external financing for their businesses. Additionally, women-founded startups get less than half the funding as startups founded by males, even though they generate 10% more income in a five-year period. 

Amy Miller, AVANA CUSO’s Credit Union Relationship Officer, says, “While there has been significant progress in recent decades, there is still a widespread funding gap that women business owners face today. At AVANA CUSO, we focus on equitable lending practices that grow businesses, create jobs and improve communities.” 

As the country’s best Credit Union Service Organization (CUSO), AVANA CUSO helps credit unions offer better service and more competitive rates on commercial real estate loan products. This translates into broader, richer support of business owners, regardless of gender.