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Thanks for coming back to the Planning for Your Purpose blog! The purpose of the blog is to discuss financial concepts that I come across in my day to day work. I want to start discussions about that will educate, benefit, and improve your financial life. Ultimately, to help you focus on your telos!

Let’s get to it

What’s the difference between a credit union and a bank? They both hold your money. Both have checking accounts, savings accounts, offer loans, and other financial related services. Aren’t they the same?

My relationship with Credit Unions

I’ve been a credit union client for a long time. My first interaction with a credit union was when I was 18. I struck out on my own and bought a truck, out of necessity of course. I needed transportation as my other ride had broken down. I initially financed it through Ford Motor Credit, at over 23%. It wasn’t that I had bad credit, it was that because I was freshly 18, I had very little credit established. I had a credit card, but it had only been a few months and it takes time to build your credit score up.

I was a student, but I was also gainfully employed. Not making much, but enough to cover my community college tuition, rent, and this payment pretty easily. Anyway, I was being penalized for my age. I was talking with one of my uncles, who advised me to go to a credit union, since my current interest rate was outrageous. I did, and I think I was able to refinance at around 6%. It’s been a long time, so I don’t remember the exact details and I definitely don’t retain documents that long. . .

Anyway, it made a huge difference for me at the time. Not only the lower payment and monthly cash flow it freed up, but also in the lower total cost paid for the vehicle.

How’d they do that?

The short answer is many credit unions operate to serve to their owners/members/account holders. So, because a lower interest rate was in my interest, it was also in their interest. They were able to use modified lending rules to recognize that while I didn’t have a full credit history, due to my age, I did have good history and my income was more than sufficient to pay my bills.

The longer answer is credit unions are regulated differently and they are not created to create the maximum income for the company, they are created to serve their members and their community.

Are banks and credit unions really different?

Yes, they may provide many of the same services, helping with many basic and essential money needs, but that’s where the similarities typically end. Credit unions are non profits. What does that mean? That means, while everyone working there gets paid and makes a living, anything above and beyond their operating expenses goes back into the community.

There are many differences. The key difference for your consideration, in my opinion, is that credit unions are created to serve their members and community. Banks are created to make money. Credit unions need to be profitable to some degree, but that’s not their primary mission. I will say that every organization is unique and they have different goals, but credit unions do have more flexibility and better ability to serve their members.

Why are banks so popular?

Marketing. Branding. They have more money to spend more on advertising and promotions. I really think that’s it. In my experience, credit unions have much better service and generally better products. I’m sure it’s not universally true, just what I’ve seen.


While I’ve always held credit union accounts and worked with credit unions, I also used to be a bank client. The main reason I kept a bank account before was ease of use. I had the bank account established, with some bills linked, added more and more over time, so it was just more convenient. I also traveled a lot more before kids and liked the idea of having available ATMs across the country. Now, cash is less of a concern, I can plan better, electronic payments are more widely accepted, I went through and spent the time and energy to change all my regular payments and deposits, and now I’m all credit union.

Maybe there’s not a credit union near you, in that case, it may not make sense to use one. A bank may be a better choice for you. Maybe the bank has a promotional auto loan or mortgage rate or interest rate that’s better than what a credit union offers. Fantastic! You should probably take the better rate. I’m not saying credit unions are the panacea, all I’m saying is in my opinion, they are generally better organized to serve your banking needs. They will generally have better rates, lower fees, more lenient lending if you have bad credit, etc. They are people and understand that you are people.


Save early and save often. Maybe with a credit union, if that makes the most sense for you. It does for me. Credit unions are generally established to serve their members, so their interests are aligned with yours. They are typically more focused on the members, rather than the bottom line, which works out in your favor. I strongly encourage you to shop credit union accounts against your bank to see if it makes sense for you to switch. As with all financial decisions, if you’re unsure, make sure to consult your financial professional for advice tailored to you. If you’re advisor won’t talk with you about banking, maybe it’s time to switch. Banking is finances and financial planners should help you plan your finances; right?

Full Disclosure

I proudly serve as a volunteer on the Board of Directors for a credit union and am a member of two credit unions as of the writing of this article.

Call Telos Financial at 734-468-3050 now to schedule a meeting to review your financial situation. Telos offers free consultations and would love the opportunity to meet with you and discuss this in more depth. Don’t forget to check my website and blog for more information and my youtube channel for videos as well.

Telos Financial is a Michigan’s financial planner for Xennials, Millennials, Generation Xers, young professionals & their families. Dennis LaVoy, CFP®, CLU® founded Telos Financial and uses his experience, knowledge, and expertise to build lifelong relationships with his clients as the financial advisor for Ann Arbor, Detroit, and across the country to achieve their goals.

The views expressed are my own opinions and do not apply to every situation. Your situation may vary so make sure to consult a professional for advice prior to making any decisions.