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Credit Unions vs. Banks: Separating Fact from Fiction

Are credit unions easy to join? What are some differences between credit unions vs. banks? We’re answering these and other common questions about credit unions. Find out how long credit unions have existed, why your money is secure and whether Arizona credit unions have lower interest rates than the competition.

Banks and credit unions were created to help people manage their money. But that doesn’t mean both types of financial institutions are cut from the same cloth. From their core values and philosophies to their loan rates and consumer benefits, there are some big differences between big banks and credit unions.

Here, we’re dispelling a few myths about credit unions by separating fact from fiction:

Fact: Credit unions have been around for a long time.

The first U.S credit union was St. Mary's Cooperative Credit Association in Manchester, New Hampshire, which opened in April of 1909.1 Desert Financial (originally Arizona Educational Association #1 Federal Credit Union) was chartered just 30 years afterward, making us one of the earliest Arizona credit unions!

Fiction: Credit unions are just like banks.

While both banks and credit unions help you manage your finances, their philosophies couldn’t be more different! Credit unions like Desert Financial are not-for-profit, while banks are typically for-profit organizations. That means banks are focused on earning more money for their shareholders, whereas credit unions give back to their members, the community and their team.

For more information on what sets credit unions apart from the competition, check out our blog on why credit unions are better than banks in a tough economy.

Fact: You own your credit union.

It sounds crazy, but this one’s true! While banks have shareholders, credit unions are owned by their members. When you join a credit union, your opening deposit ($25 at Desert Financial) is your share in the credit union. As a member, you have exclusive access to the credit union’s products and services, and other perks!

Fiction: Credit unions are hard to join.

Credit unions do have membership restrictions, but they’re not difficult to join if you fit into their membership category. Some credit unions require you to work for a particular company or in a specified field, while others have broader membership requirements. For example, Desert Financial services all of Arizona (except Apache, Graham, Greenlee and Santa Cruz counties). If you live, work or worship here or are related to someone who does, you can become a member!2

Fact: Credit unions often have lower loan rates than banks.

Historically, credit unions offer lower rates on home equity loans, mortgages, auto refinance and home loans. They also tend to pay members higher interest rates on investment accounts like money markets and CDs, so you can make more money on what you have. The NCUA compares bank and credit union loan rates3, so you can see how they stack up.

Fiction: Your money isn’t as secure at a credit union.

Your checking account, savings account and other deposit accounts are typically insured up to $250,000 at both banks and credit unions. The difference is simply in which national organization insures your money. Credit unions like Desert Financial are insured by the National Credit Union Administration (NCUA), while banks are insured by the Federal Deposit Insurance Corporation.

Fact: Credit unions can help you save money.

Credit unions spend a lot of time finding new ways to give back to their members. Because your success is their success, many credit unions provide financial education resources to help you save money and manage debt. Some of the perks of membership at Desert Financial include Free Checking4, loan discounts, and our annual Member Giveback Bonus5 — the latter of which totaled $14 million in 2020!

Fiction: Credit unions aren’t as tech-savvy as banks.

It turns out that credit unions not only have the same online and mobile banking technologies as the Big Banks, they actually have better ones. In a recent comparison of banking apps, 9 out of 10 of the top-rated banking apps were from credit unions (yes, Desert Financial is on the list)!6 Credit unions also offer fraud protection technologies such as text alerts for unusual transactions, plus online bill pay services, free budgeting tools, financial literacy webinars and other tech to make managing your money easier.

While they serve the same function, there are many distinct differences between banks and credit unions. Because they are member-owned cooperatives, credit unions put their members first! Credit unions are also known for giving back to the community through volunteering, scholarship programs, fundraising, donations and more. At Desert Financial, that’s what we call Sharing Success — and it’s one of the primary reasons we’re proud to be a credit union!

Ready for a change?

It’s easy to switch your bank or credit union!


2All Members must meet eligibility requirements and open a Membership Savings account with an initial deposit of $25.
3https://www.ncua.gov/analysis/cuso-economic-data/credit-union-bank-rates 4Primary account holder must be 18 years or older and meet Desert Financial’s membership eligibility and credit qualification requirements, including opening a Membership Savings account with a minimum balance of $25. Checking is free; however, fees incurred – such as a stop payment or NSF fee – will apply. For complete terms and conditions, refer to the published Statements of Terms, Conditions and Disclosures booklet.
5Must be a Rewards Member or Rewards+ Member for a minimum of six months per calendar year to be eligible for annual cash bonus (“Member Giveback Bonus”). Additional restrictions apply. See Statements of Terms, Conditions, and Disclosures for full details.

The material presented here is for educational purposes only, and is not intended to be used as financial, investment, or legal advice.