The Pros and Cons of Credit Unions vs. Banks
When it comes to financial institutions, there are many options available. Most everyone knows of the national and local banks that exist because they are typically competing for your business. But did you know that credit unions are also a viable option when it comes to opening a bank account or seeking out loans?
There are many pros and cons to both credit unions and banks that make it difficult to decide which may be the best choice for you. This is because it depends on the needs you have and the benefits you are looking for in a financial institution.
To learn more about the advantages and disadvantages of credit unions and banks, you will need to do extensive research. Keep reading to discover why a credit union may be right for some people and a bank the right choice for others.
What’s the Difference Between a Credit Union and a Bank?
While there are many choices for someone looking for a financial institution to meet their needs, many people make their own choices based on several factors. Some people choose to open their bank accounts through a local or national bank, while others choose to bank with a local or national credit union. Whatever you decide, you will want to ensure you have done your research before opening an account.
Basically, a credit union is a non-profit organization. This means that they are owned by their members. Credit unions are typically niched down to a particular industry. For example, they may offer services to those in the military, education, or farming industries, to name a few.
Since credit unions are not-for-profit, they usually do not have as many products and services to offer. What they do offer, though, is the ability to provide the best terms for the products they do promote. This means that members will benefit from lower interest rates and lower fees on various products and services.
Additionally, because credit unions exist to serve members, they also offer the added benefit of financial education. Many offer their members access to articles and other resources on various financial topics. Some even provide seminars and workshops for their members.
Meanwhile, the biggest factor that makes a bank different from a credit union is that they are considered for-profit. This means that they are either privately owned or publicly traded. Banks, whether they are local or national branches, are in the business of making a profit. This is why they have higher rates for many of the services and products they offer.
Banks typically offer accounts to most consumers as long as they have good standing with prior financial institutions. This makes banking with a traditional institution much easier and therefore much more appealing. Customers of banks do not have to be affiliated with specific industries, which, for some people, makes things simpler.
With all the modern technology that has made banking much more convenient, banks definitely have a leg up on credit unions. Since they are able to charge for services and products, they also can take advantage of the vast amount of technology that exists in the financial world.
How Do I Find Local Credit Unions?
When it comes to finding a credit union, there are many ways you can go about doing it. It is important to do your research and find the one that suits you best. You will want to ensure you are looking for the type of credit union that fits the industry you are working in as well.
As with anything else you may be looking for, starting with a basic internet search for a local credit union is usually the first step. This is because the computer you use is typically honed into the area you live in. A list of choices is usually provided along with their location for convenience.
Additionally, the NCUA, or National Credit Union Administration, provides a map on their website so you can find credible information about the credit unions in your area. You just have to enter some information, such as your zip code, and it will return local options where you live.
Another important part of researching for a credit union in your area is reading current member reviews. When doing an internet search, you can often find reviews done on either specific review websites or articles and blog posts that have ratings of different credit union options.
In many cases, just like anything else in your life, word of mouth goes a long way. You probably work or associate with people who do their banking at local credit unions. Starting by simply asking your friends and family who they bank with, you might just be surprised by the amount of knowledge you come across.
No matter how you choose to search for a local credit union, you will want to ensure the choices are going to meet your needs. Doing your due diligence is key in finding the right place to keep your hard-earned money safe.
While credit unions and banks have many differences, they also have some similarities. These similarities can make it harder for consumers to determine which is right for them. When making the decision between the types of financial institutions to bank with, you should consider what they have in common as well as how they are different.
For example, the types of accounts people can offer at both institutions are typically the same. From checking and savings accounts to money market accounts, both credit unions and banks offer choices for these types of accounts.
Also, both financial institutions typically offer certain types of loans for their customers or members. Both credit unions and banks offer a variety of loan choices. From home loans to auto loans, as well as small business loans and credit cards, they pretty much have things covered.
Most people know about the federal protection, which is provided by most traditional banks under the FDIC, or Federal Deposit Insurance Corporation, for deposits up to $250,000. But did you know that credit unions also offer this same protection? The NCUA, or National Credit Union Administration, was established to provide the same protections upheld by banks for credit union members.
Whether you choose a credit union or a bank for your financial needs, it is critical to know all the advantages and disadvantages of each. This is because when you are well-informed about both types of institutions, you can make a more informed decision about where to put your money.
The Pros and Cons of Credit Unions vs. Banks
As you are trying to decide if a credit union or a bank is right for you, you will also want to consider the pros and cons of each. This is because your money should be handled with care, and the right financial institution will do that for you.
When looking at the pros and cons, remember that having one con doesn’t mean you shouldn’t choose that financial institution. This is because what may be a con for someone else may be a positive for you. It boils down to what you want out of the relationship. Are you one that likes more options? Do you like a more family-oriented experience? These are some valid questions you should be asking yourself before you decide.
As you are making the decision about your financial future, you will want to keep a few things in mind about credit unions. Since they are different from a traditional bank, knowing how they operate can be enlightening and really help guide your decision.
Credit Union Pros
- Lower interest rates on loans
- Lower and fewer fees
- Accounts insured through NCUA up to $250,000
- Top-notch customer service
- Financial education for members
- Higher APYs on savings
Credit unions are owned by their members, which means they do not earn a profit from the services they provide. This is important to remember since they cannot always offer the same types of products and services you might find in a traditional bank.
There are other advantages in choosing a credit union rather than a bank for your financial needs. If you are a member of a credit union, you may be able to get approved for loans that you otherwise would have been denied. This is because credit unions work hard to keep their members satisfied. After all, they know their job relies on happy customers.
Bank Pros
- More products offered
- More financial technology is available
- More branches and ATM’s
- More convenient for customers
- Accounts insured through FDIC up to $250,000
There are additionally certain advantages of choosing to do business with a traditional bank instead of a credit union. Many of these reasons stem from the fact that banks have been around for a long time and people tend to be more familiar with them.
Credit Union Cons
- Fewer products offered
- Less financial technology is available
- Fewer branches and ATMs are available
- Members must meet eligibility requirements
The biggest problem most people have with credit unions is that they don’t typically work on a large scale but rather in a local community. This means that you may have to change credit unions when you move states, or even just when you move cities.
Bank Cons
- Higher interest rates on loans
- Higher and more fees
- Lower APYs on savings
One of the biggest cons of a bank is that they are in the business of earning a profit, which also means it pays taxes. They typically charge more for their products and services. Additionally, the banking fees on checking and savings accounts are usually higher compared to a credit union.
When doing business with a traditional bank, you can expect less personalized attention. This is because banks typically have a lot of customers since they do not serve a particular demographic. Most people can get approved for checking and/or savings accounts as long as they have had good standing in the past.
Once you have done your research on both credit unions and banks, it is time for you to start narrowing your options down. Whichever financial institution you choose, there is one final factor you need to consider before signing up, and that is how far you want your bank to travel with you.
When you choose a national credit union or bank, you have the added benefit of being able to “take it with you” if you should move to a different location. Most national institutions have locations all over the country and many in other countries as well. They also tend to have more options for those who enjoy traveling overseas.
Many people choose to do their banking with a local institution. This is because of the sense of community often found in these locations. The local credit unions and banks know the environment and can usually make the experience more personal for consumers. But be prepared, because if you plan to move soon, you will likely need a new financial institution when you do.
Outro
At the end of the day, choosing a financial institution is a completely personal decision. It is important to know your options and consider them carefully. Whether you choose a credit union or a bank to take care of your financial needs, you should ensure you have done an ample amount of research before making your final decision. Then you can finally sleep easy at night knowing your money is in the right place.
