Banks vs. Credit Union – Which Is Right for You?
Banks and credit unions provide many of the same services. Both offer federal deposit insurance, so up to $250,000 per deposit or, per institution is protected. However, it is the differences between these two types of financial institutions that will lead you to a decision about where to put your money. When it comes to deciding between a bank vs. credit union, see which best serves your needs. It’s a matter of determining your priorities.
Credit Union vs. Bank
The basic difference between a bank and credit union is that the former operates on a for-profit basis, while the latter is a non-profit. Credit unions consist of members, and they are the ones who actually own and control the financial institution. Banks are owned by shareholders, and the primary aim of the bank is maximizing shareholder profits.
Credit unions and banks offer many of the same financial products. These range from credit cards, mortgages, car loans, personal loans, savings and checking accounts and business accounts.
Bank Advantages and Disadvantages
Banks, especially large ones, will have more branches than a credit union and offer more convenience. If you need more sophisticated financial services, such as those regarding trustees, a bank is more likely to provide assistance than a credit union. Banks tend to provide customers with the latest in technology, at least compared to their credit union rivals. Most customers will find a banks’ online and mobile tools more useful than those of a credit union.
As long as you are 18 or older and a legal resident, you should prove able to open a bank account at any branch. Some smaller banks may require that you reside in the region.
If rewards programs are important to you, banks offer better deals. For some customers, the lack of competitive rewards programs at credit unions makes the decision to go with a bank much easier.
On the downside, banks will generally charge higher interest rates on loans, and higher transaction fees than credit unions. Interest rates on savings accounts, CDs, and similar investment vehicles are usually lower.
Credit Union Advantages and Disadvantages
As a member of a credit union, you can expect more in the way of personal service than with a bank. Because you are a member, and not just a customer, you have more of an investment in the institution.
If you’re a saver, you will probably find a higher rate on savings and money market accounts. You should also find that credit unions offer lower interest rates than many banks. Free checking is a popular credit union perk.
Unlike a bank, you cannot just open an account at a credit union. You must qualify for membership. The good news is that membership terms are flexible, and most applicants will meet the criteria. Credit union membership often revolves around a worksite, house of worship or denomination, or a particular community. Family members are generally eligible to join their relative’s credit unions. If you are ineligible to join one particular credit union, it is likely you are eligible for others based on membership requirements.
One of the great advantages of credit unions is their commitment to member education. Credit unions pride themselves on providing financial literacy to members, on the theory that an educated customer is their best customer. It is part of the more personal touch for which credit unions are known.
A major disadvantage is that relatively few credit unions use state-of-the-art apps and technology. They are generally a few years behind bank tech. You might find your online experiences less user-friendly than with a bank. If cutting edge tech is a necessity, go with a bank.
If you’re not certain whether a bank or credit union is the right choice for your needs, SmartCredit can help you make the decision. We are in the financial literacy business, and our goal is for customers to achieve their best possible credit score. From there, they can find and secure the best loans available, no matter which type of financial institution is involved. Contact us to learn more today.