Credit Unions vs. Banks: Which One is Better?
You finally earned enough money, and you’re wondering where you should put it: to the bank or the credit union. Both banks and credit unions offer perks and benefits to customers, but they also have differences one should consider. While they’re equally safe and secured, there are pros and cons unique to each one.
Here we identify the key differences between credit unions and banks in terms of rates, convenience, and products and services provided.
Banks: An Overview
Banks are owned by corporations and investors, and they exist for one goal: to profit. According to Statista, there were 4,519 FDIC-insured commercial banks in the United States as of 2019.
Anyone can open an account in a bank granting they have good banking history. These consumers may be individuals or organizations and both share the same benefits.
For people starting to gain more control of their finances, banks are easier and more accessible. This is because banks accept everyone and treat them as customers.
Banks have more branches and ATMs which are easily accessible in every city and every state wherever you are. They also online or SMS/mobile banking for added convenience which makes banking available 24/7. Banks are more technologically advanced compared to credit unions as they often have the budget for this.
Since the main goal of banks is to gain profit, loans have higher interest rates. For savings products, banks also offer lower interest rates making money gain slower over a period of time. Although there are banks offering zero maintaining balance, the fees are much higher.
Credit Unions: An Overview
Credit unions are established not to gain profit and are owned by their members. About 120 million Americans are members of one according to the Credit Union National Association. The goal of a credit union is to teach its members how to gain more control of their finances. Moreover, each member has a say in the policies and choosing the right leaders on every credit union.
Credit Unions: Pros
The goal of every credit union is not to profit, so fees are lower compared to banks. Credit unions also offer lower interest rates to their loan products and higher interest rates to savings products. This is a wiser choice for people opting to make their savings grow faster while enjoying lower interest rates on all types of loans.
Members of the credit union can express themselves more freely as they have the right to do so. They have the ability to vote on credit union policies and participate in decisions that customers of a bank cannot do.
Credit Unions: Cons
Entering a credit union might be a little difficult compared to banks as they have more requirements. Incoming members may be required to attend an orientation before becoming a full-fledged one.
Since credit unions are smaller than banks, they offer limited loans and savings products to their members. They often don’t have the budget for technology, so members have limited to no access to online banking in credit unions. This is a downside if you want the convenience a bank typically offers.
Banks Vs. Credit Unions: Which one is right for you?
Now that we have laid out the pros and cons of banks and credit unions, which one is actually better for you? It is best to note that banks treat you as customers while credit unions treat you as members.
If you want to have more loans and savings options, the bank is the one for you. If you are someone on the go, the convenience of online and mobile banking is definitely a plus and often a life-saver. For those people who want lower interest rates on loans and higher rates on savings, the credit union is the perfect match. If you want to freely express yourself as a member, the credit union is also for you.
Overall, both banks and credit unions have unique perks based on what is more important to you. They are equally useful and beneficial depending on how you use them. One should take into consideration the factors we stated earlier to help in choosing the best option between the two.