Credit union vs bank – what’s the difference?

Credit union vs bank – what’s the difference?

If you’re looking for a new bank, there’s plenty of competition to choose from, including big banks and smaller local banks. But what about credit unions? What are the main differences between a credit union and a bank, and what are their advantages and disadvantages?

What is a credit union?

Credit unions are membership-based financial institutions. Becoming a customer of a credit union means becoming a member, which in turn means becoming a part-owner of the credit union.

Historically, many credit unions were founded as community organisations, intended to service the financial needs of specific geographical areas (e.g. rural areas, outlying suburbs, regional centres), or workers in particular industries (e.g. police, nurses, rail workers, teachers). Members of these credit unions would pool their money to provide financial services to one another.

Today, most credit unions no longer limit their membership, and are open to anyone. Many have also started changing their names to help avoid confusion. Credit unions offer many of the same services as banks, including savings and transaction accounts, home and personal loans, credit cards and term deposits.

What’s the difference between banks and credit unions?

The biggest difference between a credit union and a bank is that while banks are typically owned by shareholders, credit unions are owned by their members. While banks often use their profits to pay dividends to shareholders, credit unions use their profits to provide added benefits to their members, such as lower fees or reduced interest rates.

How banks and credit unions are the same

Both banks and credit unions are recognised as Authorised Deposit-taking Institutions (ADIs) under the law. If a bank or credit union was to go out of business, there are government regulations in place to help guarantee and protect your money.  

Because credit unions are regulated similarly to banks, and because laws around ADI naming recently changed, some credit unions have started rebranding themselves as “banks” in recent years.

Advantages of credit unions

Thanks to their history as community-based institutions, credit unions often provide services with a personal touch and understanding of local needs.

Because of their smaller size compared to the big banks, and closer focus on providing services to members instead of providing dividends to shareholders, credit unions can be more competitive when offering services, such as more affordable interest rates and lower fees.

Disadvantages of credit unions

Some credit unions and smaller mutual banks are only able to provide local branch services. If you’re located outside the areas they cover, it may be harder to access face to face banking services. You may still be able to access some branch services from Australia Post outlets, or you could bank remotely by phone or by using online banking apps and similar platforms.

Credit unions often provide competitive financial products and services, but they may not always offer as great a variety of options as larger banks.

Big banks often have multiple branches servicing metro areas and regional centres, and can also offer a wide range of financial services, which can be accessed over the phone and online.

Before you switch banks or credit unions, it’s essential that you compare the features, benefits, fees and charges of available options, look at your personal financial situation, and work out which options may be right for you. If you’re not sure, consider contacting a finance counsellor for more personal advice.

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Learn more about bank accounts

How do you find a bank account number by name?

For privacy reasons, Australian banks won’t hand out account numbers or other details about their customers. However, if you provide a bank with a BSB and account number, they should be able to confirm if those numbers belong to one of their customers.

Can a debt collector garnish my bank account?

A debt collector can garnish your bank account, but only with a court order. This drastic action is usually taken only if you’ve ignored several notices asking you to pay the debt.

If this happens, there is nothing you can do to stop it other than immediately pay back your what you owe in full or make arrangements to pay it off in installments.

Once a garnishee order is issued, your bank will put a freeze on your account as it processes the order. This usually takes two to three days and you won’t be able to access any of your money during this time.

If you have Centrelink payments, they may be protected, depending on what the court order says.

How can I check my bank account balance online?

Checking your bank account balance online is a simple process. Once you’ve logged in to your online banking, clock on the relevant account and the balance should be visible.

How can I deposit cash into my bank account?

The traditional way to deposit cash into your bank account is to go to a branch and give it to a teller. These days, many banks will allow you to make deposits through an ATM as well.

Can I set up a bank account online?

Most Australia-based lenders will allow you to set up a bank account online. Requirements vary from lender to lender, but you will probably need to provide a passport or birth certificate, as well as a driver’s licence, Medicare card or another form of secondary ID.

Can I open a bank account in another country?

Despite having a bad rap for facilitating tax evasion, it is possible and legal to open a bank account in another country, also known as an ‘offshore account’.

Some people choose to open a bank account in another country to invest overseas, for higher interest-earning potential or to access foreign banking services.

The process for opening an offshore bank account differs depending on the financial institution and country in which you’re opening the account.

Typically, you will need to provide identification such as a passport, a local bank statement and a signed declaration proving the source of the money being used to open your account. Usually, deposits into offshore accounts can be made by international money transfer.

How do you open a bank account in Australia?

Opening a bank account in Australia is usually a straightforward process. Some banks give you the option of opening an account online, while others require you to visit a branch.

Different bank accounts offer different features, so it’s best to compare your options to find one that suits you.

All banks require you to pass an identity check to open a bank account. Australia uses the 100-point identification system, which means you’ll need to show a number of forms of ID that, together, add up to 100 points.

Common ID types include a driver’s licence, passport, Australian visa in a foreign passport, and Australian Medicare card. You’ll find out what types of ID are accepted when you go through the sign-up process online or at a branch.

Once your account is open, you’ll be given or sent a debit card that you can use to make purchases and withdraw money from your account.

How long does it take to open a bank account?

The length of time it takes to open a bank account varies, depending on whether you want to open it online or in person.

Online

Most banks and credit unions have simple online applications that usually take no more than 10 minutes to fill out. It can be especially fast if you have your identification documents like your driver’s licence and passport handy. Sometimes you will instantly be approved and the bank account opened. However, depending on the financial institution, it may take a day or so to be processed and your account number issued. Your account information and ATM or debit card will then be mailed to you, which usually takes between five to 10 days.

In person

If you decide to go into a branch or office to open a bank account, it may take about half an hour. Make sure you bring your identification documents with you. Also book an appointment if you can, otherwise you might be forced to wait in line. Sometimes your ATM or debit card will be issued on the spot, otherwise you’ll need to wait for one to arrive by mail, which usually takes between five to 10 days.

Can I find my bank account number online?

Yes, you can find your bank account number by logging into your online banking and clicking on the relevant account.

Can you find your bank account number online?

If your bank offers online services, you should be able to find your bank account number online by logging into your account on your bank’s website and checking your details there.

Keep in mind that each type of account you have with a bank comes with a unique account number. This means if you have a bank account as well as a savings account, for example, your bank account number and your savings account number will be different.

If you don’t have access to your bank account online or can’t login, you should be able to find your account number on a mailed bank statement, if you have one.

Alternatively, you can call your bank’s customer service number or visit a branch to retrieve your account number.

Can I have a PayPal account without a bank account?

You don’t need a bank account to send or receive money through PayPal. However, you do need a bank account if you want to withdraw money from your PayPal account.

Do you need a bank account to get a credit card?

To get a credit card, you need to show proof of income, which will almost certainly require you to have a bank account.

Can I start a bank account online?

Yes, most lenders that operate in Australia will let you set up a bank account online. The process is usually simple and takes five to 10 minutes. You will probably need to provide a passport or birth certificate, as well as a driver’s licence, Medicare card or another form of secondary identification. Requirements differ from lender to lender, so some institutions might ask for more or different forms of ID.

Can you get a payday loan without a bank account?

Yes. Some payday lenders are willing to transfer loans to prepaid debit cards instead of bank accounts.