Bank or Credit Union?
Banks are not the only financial institutions that help your money grow; enter the credit union. If you haven’t heard of a credit union it may offer different services and experiences that you may need. Both banks and credit unions are federally insured. Banks are insured by the FDIC and federally insured credit unions are insured by the NCUA. The main difference is that banks are a for profit organization while credit unions are a nonprofit. Those subtle differences change what each type of institution has to offer.
Banks have the most commercial accessibility. Many big banks, such as Bank of America, Chase, Wells Fargo, etc. have thousands of ATMS and branche nationwide. It’s a breeze to access the money and banking services you may need in a pinch. Can’t reach an ATM? No worries, many banks offer robust online services, from depositing checks, to opening a new line credit and getting loans. These services and more are offered traditionally and electronically. Banks also have many products and services that are not seen in credit unions, such as business loans and business accounts. As well as many services for wealth management.
However, this all comes at a cost of higher fees and interest rates. Since banks do need to churn a profit for their investors the bottom line is making money, sometimes to the detriment of their customers. This can clash with the interest of customers who seek out lower interest rates and fees. Many banks have high fees, and interstate rates as well as strict rules needed to maintain an account, such as a high minimum balance or making a specific number of purchases/deposits each mouth. If you fall short of these rules you may be charged a monthly maintenance fee or a penalty just to keep your accounts active. In a addition some banks may also be dissuaded to work with those who have poor or no credit history and somebanks, suffer from mediocre customer service and conflict of interest between their customers and their investors
Now we have credit unions. The nonprofit cousins of banks. Because they are nonprofit many credit unions have lower fees and interest rates. This also includes a low minimum balance to keep accounts open. Most only require a minimum balance of less than 20 dollars (usually 5). These lower fees are coupled with higher returns on savings accounts, checking accounts and even CDs (Certificate of Deposit), when compared with a traditional bank.The nature of credit unions means they are member run and owned rather than being owned by investors, making credit unions a co-op. Members have a chance to vote on the goings in the credit union and how it will affect the members. This community mindset spurs many credit unions to offer services to educate their members on financial literacy, and may offer other services outside the traditional banking. Credit unions are also more likely to work with those who have subpar or bad credit. The customer service is also plus, because the members are their number one priority customer service is more friendly as well.
But because credit unions are member dependent, it may be harder to join a one. Many credit unions have requirements you must meet before you become a member. You may have to have lived in a certain area, graduated from a specific school, or be part of a specific religion or group (i.e the military). This may make it harder to join and open an account with a credit union. And since most credit unions are regional they have limited branch locations and limited ATMs outside the area. However some credit unions are part of a shared network, meaning if you are a part of one credit union you can access your account and do minor services (such as withdrawing and depositing money) at a different credit union or branch. Credit unions may also be limited in the products and services they provide when it comes to loans, credit cards and investment options. They may also have subpar online banking and technology.
Depending on what your needs are you can decide if a credit union or a bank is better for you. And if you’re so inclined you can always subscribe to both.
- Non-profit member owned financial institution/ cooperatives -so you do not have to keep a profit and fees are low
- Member owned and member run
- Offers services that are similar to a bank
- Lower rates on loans and credit cards
- Lower intertest rates and fees- https://www.thebalance.com/advantages-of-credit-unions-2385855
- Usually low minimum balance to maintain checking and saving account (usually 5 -20 dollars)
- Customer focused
- Willing to work with those who have lack luster credit history-https://www.thebalance.com/advantages-of-credit-unions-2385855
- Usually higher saving account rats
- Usually friendlier-https://www.nerdwallet.com/blog/banking/credit-unions-vs-banks/
- Better interest rates- https://www.thebalance.com/advantages-of-credit-unions-2385855
- checking and savings accounts, CDs, loan products, and credit cards.
- Many of financial education programs and other services besides financial
- Once joined a credit union you can withdraw money from any other credit union
- Close connection with community and members
- You can vote (https://www.creditkarma.com/advice/i/benefits-of-a-credit-union)
Usually limited locations
- Less ATMS-https://www.bankrate.com/banking/banks-vs-credit-unions/
- Less options such types of checking accounts and credit cards
- Membership can be hard to get (usually you have to affiliated with something or live in a particular location) – https://www.bankrate.com/banking/banks-vs-credit-unions/
- Subpar online banking
Banks-for profit institutions owned by investors so the investors ad customer goal may not always be the same-so have to make profit for investors hence why fees and interest rates are high
- Pros larger network (https://www.creditkarma.com/advice/i/benefits-of-a-credit-union)
- Anyone can open up a bank
- More products and services
- More convenient
- Better online banking and services (https://www.investopedia.com/credit-unions-vs-banks-4590218#:~:text=Credit%20unions%20tend%20to%20have,more%20branches%20and%20ATMs%20nationwide.)
- More loactions-https://www.nerdwallet.com/blog/banking/credit-unions-vs-banks/
- Higher fees
- High interest rates
- Mediocre customer service