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Crown Bank is proud to be named among the top 20 community banks nationwide by the Independent Community Bankers of America (ICBA)

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Community Banks Vs Credit Unions: What’s The Difference?

While big banks are popular among many people, and often found nationwide, they may not necessarily be the best option for your business. As national banks can serve hundreds and thousands of people and companies, you may find it hard to get the support and guidance you need. 

Depending on your unique situation, you may have a few alternatives that can offer you more individualized attention. For a more personalized banking experience, and often better customer service, you can look into both community banks and credit unions

While both credit unions and community banks offer essential services like checking accounts, savings accounts, and personal loans, these two financial institutions operate in otherwise dissimilar ways. Based on your needs, you can decide which options are available to you, and which one is the best fit.

How do community banks work?

In general, community banks provide traditional banking services to a particular area, with a specific intent to support their surrounding local community.

By working almost exclusively with individuals and businesses local to their area, community banks have a specific understanding of their customers and expertise in their region. This provides them with distinct insight into how to best support their community.

Foundationally, community banks are dedicated to cultivating relationships with their communities, both with businesses and individuals. By making loans to local businesses, and establishing relationships with local individuals, they are able to stimulate growth in their community. 


Pros of community banks 

Personal connection & attention

Community banks are known for their increased customer service and more personalized experience. In a community bank setting, you can work closely with bankers who understand your financial needs and are able to provide helpful solutions to your unique situation. By developing a relationship with your community bank, you get specific attention and can better address issues like overdrawn accounts or questions surrounding loans. 

Increased flexibility

Since you have better access to your bankers at a community bank, you can find more support in getting loans approved, or opening credit cards. Because community banks are focused on maintaining personal relationships, they tend to have less rigid standards for approving lending decisions, and can offer you more flexibility and increased options. 

Support for your community

As community banks are closely tied to their communities, they lend to individuals and businesses in the community to boost economic activity. According to research from the Federal Deposit Insurance Corporation (FDIC), community banks are a driving force for local businesses and are a key provider of funding for many local businesses. With this, simply by working with a community bank, you are supporting growth in your local community. 

Cons of community banks

Offerings vary

Due to the variability across community banks, the options you have available to you at one location may differ from the options you have with another. While some community banks focus only on basic community needs, others span flexible lending options, different ways to save for your future, and checking accounts designed for you. By finding a bank with a wide variety of these offerings, like Crown Bank, you can find support toward meeting your goals.

Limited to a geographic area

One of the main attributes among community banks is that they serve a single local area. While this is not an issue if you remain in your local community, if you decide to move, you may be faced with having to switch banks. Some community banks, though, offer multiple locations and provide a level of personal care that gives you access to your bankers, instead of automated responses.

How do credit unions work?

Credit unions are nonprofit financial institutions that are created, owned, and operated by their members. To establish a credit union, members pool their money in order to provide financial products and services for each other. These products and services are the same as those offered by a traditional bank, including loans, credit cards, and checking and savings accounts.

Since credit unions are member-driven, in order to join one, you must become a member by opening an account. In doing this, you’re buying shares into the cooperative, and you’re contributing to the greater financial backing of the institution, while benefiting from it.

While every credit union is different, all credit unions have eligibility requirements you must meet in order to qualify. Once approved, you become not only a member but a partial owner, and you participate in the union’s affairs and decision making. This involves electing a board of directors to manage the credit union to ensure everyone’s best interests are represented. Typically, each member gets an equal vote, regardless of how much money is in their account. 

Pros of credit unions

Reduced fees

Similar to banks, credit unions charge interest and account fees. However, banks give these profits to shareholders, whereas credit unions are member-owned, which results in lower monthly fees and minimum balances.

Lower interest rates on credit cards and loans

Due to their nonprofit structure, credit unions can reinvest these profits from fees back into the union. This means credit unions can give these profits back to their members in the form of higher interest rates when opening a credit card or savings account and taking out a loan.

Higher interest rates on savings accounts

For savings accounts, credit unions typically offer higher interest rates that allow you to yield more on deposits made into your account. Over time, this accrued interest can add up to earning more money on your savings.

Cons of credit unions

Must be eligible

Due to the nature of credit unions, they aren’t open to all consumers, and you must become a member to join. In order to become a member, you will have to be approved based on your eligibility.,Some credit unions require a membership fee.

Fewer products and services

While credit unions provide most common financial services, they often offer a limited selection of options. For example, you may have the option to open a credit card, but the credit card options available are fewer than you may find at a bank. In addition, credit unions loan offerings are primarily to consumers for home lending and large purchases such as automobiles. Credit unions are limited in their ability to offer business to business loans.

How to make the right personal finance decision

While you can find similar products and services with credit unions and community banks, because there is high variability across individual institutions, the right banking option for you may be determined by the options available to you in your area.

If you are in the Twin Cities community, and you’re looking for a personalized banking experience with specific attention toward you and your financial needs, you can look to Crown Bank to be a trusted partner. 

Crown Bank not only offers a variety of  checking and savings options and personalized banking support but is dedicated to getting to know you and finding ways to best support you. Connect with us so we can work toward your financial goals together.