When the time comes to put your hard earned money into an account to save or invest it, we don’t always know where to go.
Where will you get a good rate paired with great customer service?
To help you make a decision on the type of institution that’ll benefit you the most, we’ve put together some information on using a credit union vs bank.
A Credit Union is an non profit cooperative that allows members to borrow money at lower interest rates and fewer fees. Credit unions are more focused on serving their members than actually maximizing the corporate profits.
Credit unions started out as a way to provide financial services to the employees of different organizations. Over time, they’ve expanded and now allow more people to join.
A bank is a for profit financial institution that is licensed and authorized by the government to:
- Accept deposits
- Pay Interest
- Clear checks
- Loan money through loans
Banks are all for profit but come with the benefit that you can keep your money in a safe place where you feel comfortable.
When it comes to a bank, interest rates will vary based on the specific financial product, but you can always expect higher fees.
Why Choose a Credit Union?
A credit union is more focused on their members and providing good customer service. Plus you’ll get more for your money when it’s in a personal account with a credit union, as opposed to other types of financial institutions.
Why Choose a Bank?
If you choose a bank you’ll have multiple branches to access if you’re in the need of any financial service.
- Making a deposit
- Withdrawing money
- Completing a wire transfer
- Transfer money from one account to another
- Pay some bills
- Apply for a personal loan, mortgage loan, car loan
- Open a personal account
- Open a CD
- Open an IRA
Many banks offer many branches in every state and some even worldwide, making it more convenient for you.
Another thing that makes using a bank more convenient is their accessibility. You’ll be able to access all of your bank’s services through the mobile app or online site.
Both Mint and YNAB were designed to help you create a #budget and analyze your #spending patterns so you can make the modifications necessary to reach your #FinancialGoals.https://t.co/rw7DGBQ6UZ#ThursdayThoughts #financialservices pic.twitter.com/IcpIJOIcek
— Get Out of Debt (@getoutofdebtcom) February 28, 2019
Credit Union vs Bank: Size
When exploring the differences, you’ll see that both credit unions and banks pretty much offer the same products and services. But, how often do you see a bank compared to a credit union?
Banks seem to be everywhere, they have branches nationwide, and perhaps even worldwide.
On the other hand, credit unions tend to be smaller and serve a small community.
When you become a member with a credit union, brick and mortar locations will be limited. Plus, they’re always local so you won’t be able to easily access your account while traveling.
Credit Union vs Bank: Eligibility Requirements
Credit unions will require you to become a member.
However, this is sometimes restricted to certain groups based on where they live, work, or attend school. In some cases you’ll need to be a part of a certain group in order to be able to join a credit union and become a member.
Keep in mind that some credit unions will allow you to become a member if you have a family member or spouse who is already signed up with them.
The Federal Credit Union Act states that once you become a member of a credit union, you will continue to be a member for life, even if you leave your affiliated group.
So in other words, if you became a member of that credit union as a result of your job, and you decide to leave your job, you still remain in the credit union.
A bank will do business with anyone, but you need to comply with the specific requirements that come based on the type of account you are opening. Not doing so will result in your account being closed.
For example: Let’s say that you have a checking account that requires a minimum balance of $500 a month in order not to get charged a $10 fee. But you go 2 months without keeping up with the $500 monthly required balance. The bank will charge you $10 each month that you don’t have the required balance in the account. If you are unable to pay the $10 fee, your account will be closed.
Credit Union vs Bank: Products & Services
When you are looking into a credit union make sure to explore what they offer, since not all of them will offer all the same products.
Credit Unions offer:
- Checking accounts
- Savings accounts
- Credit Cards (not all credit unions offer this)
- Retirement accounts
- Mortgage loans
- Auto loans
- Personal loans
- ATMs (not all credit unions offer this)
- Business accounts
They also tend to offer better insurance rates, lower fees, and great customer service.
Banks offer a wider range of products, including commercial banking. The specific products will vary based on financial institution.
- Checking accounts
- Savings accounts
- Debit cards
- Prepaid cards
- Credit cards
- Foreign Exchange
- Online banking
- Transfer and pay
- Mobile apps
- Mortgage loans
- Home equity lines
- Personal lines
- Personal loans
- Student loans
- Auto loans
- Business Accounts
- Business loans
- Merchant services
- Payroll services
You’ll find a wider range of products with a bank than you would with a credit union.
When you take a loan out or apply for a credit card, you will hear the term “APR” or annual percentage rate.
— Get Out of Debt (@getoutofdebtcom) February 21, 2019
Credit Union vs Bank: Accessibility & Customer Service
Most Credit Unions don’t offer a wide range of branches or ATMs. To try to compensate for this, many credit unions have joined ATM and branch sharing networks to provide more convenient access to their services.
With most credit unions you’ll have:
- Limited hours
- No mobile banking apps
- No ATM cards
If you are the type of person that wants to have easy access to your money, a credit union is probably not the right choice for you.
Credit unions will go on and beyond your expectations with their customer service to try to make up for what they can’t offer. They are known to be very customer service oriented, so if you are the type of person that is looking for great customer assistance, a credit union will give you that.
Banks offer a larger range of branches, as well as ATMs networks.
Let’s say that you’re traveling and something unexpected happens where you now need extra cash. If you use a bank, you’ll be able to access a branch or ATM close by.
Banks customer service will offer the following:
- 24/7 customer service
- Weekend hours
- Latest advances in electronic (apps)
- Mobile banking
The bigger the banks, the more reports that their customer service satisfaction decreases. Banks have so many customers that they are not concentrated on satisfying every single customer’s needs.
If you’re looking for easy access to your money and the ability to make changes at any time, a bank is your best option. But, if you are focused on customer service, you should look into a credit union.
Credit Union vs Bank: Fees & Rates
Credit Unions tend to have lower fees for:
- Non Sufficient funds
- ATM fees
Credit Unions have better rates for:
- Checking accounts
- Savings accounts
Most Credit unions will not require a minimum balance on deposit accounts to avoid fees.
Banks are all about charges and fees!
You will have to read the fine print to make sure you’re aware of all the charges and fees that come with opening an account at a bank. But, you’ll also receive the lowest possible interest rates..
Credit Union vs Bank: Tax Structure
Credit Unions are nonprofit organizations so they are not required to pay any state or federal income taxes.
This allows credit unions to offer:
- Favorable interest rates
- Fewer charges
- Cheaper fees
Banks are a for profit company who are subject to state and federal taxes on their corporate profits.
Credit Union vs. Bank: Pros and Cons
Credit Union Pros
As Credit Unions are nonprofit companies, they will be able to offer you certain things that banks won’t.
- Higher interest rates on deposit accounts
- Low interest rates on loans
- Lower fees
- A more personal customer service experience
- Even if you are not part of a specific group that makes you eligible for membership, you can join the credit union through a family member or spouse.
Credit Union Cons
- Less products
- Less locations
- Less online services
- Very little or no technology when it comes to apps, which makes it a bit less of a user friendly experience.
Credit unions are ideal for people that live close by and have the time to visit the bank whenever they need to make a transaction, or for people that are not in the need of constantly making financial moves.
Banks tend to be more convenient as users often depend on mobile banking services these days.
- More locations
- Many online services options
- More products
- Better technology (such as apps)
- Easier access
- Low interest rates on their deposit accounts
- High interest rates on loans
- Many fees attached to their products
- Poor customer service due to the number of clients (the bigger the bank, the worse the customer service will be)
Credit Union vs. Bank: Which Is Best for Investing?
Most credit unions will offer:
- Good deals on loans
- Free checking accounts for members
- Higher interest rates on Saving accounts as well as for CDs
- Good retirement accounts, with attractive interest rates.
All of these translate into more money in your pocket.
When it comes to banks, it really comes down to their rewards programs. You may find that these are beneficial to you, depending on how often you use a credit card.
Banks also offer many different products when it comes to investing and retirement that worth exploring.
When looking into investing, do your due diligence and compare rates for both Credit Unions and Banks. You should even take the time to look at more than one institution for each.
You want to make sure that you select the right one for you. Never rush to make a decision, especially when you are talking about financial decisions.
Credit Union vs Bank: Which is Safer:
Safety is always a big concern when you’re making a financial decision. Both Credit Unions and Banks are insured to protect your money.
Credit Unions are backed by the National Credit Union Share Insurance Fund (NCUSIF) and banks are insured by the US Government through Federal Deposit Insurance Corporation (FDIC).
Both the NCUSIF and FDIC will protect you up to $250,000 per depositor under current laws. If the funds you have exceed $250,000, you will need to have different accounts to keep it protected.
For example: Let’s say you have $350,000 in your checking account and $100,000 in a Savings account. Out of this money if something were to happen, you will have be able to secure $350,000 out of the $450,000 through either the NCUSIF or the FDIC.
Out of your checking account they will secure $250,000 and out of the Savings they will secure the $100,000 (they could secure up to $250,000 in each individual account).
So let’s say that instead of having $350,000 in checking and $100,000 in savings, you had $250,000 in checking and $200,000 in savings and something were to happen, in this case you would have secured all $450,000.
Make sure that you don’t exceed the $250,000 limit per account.
Same thing goes with joint accounts which will secure $250,000 per account holder. So, in a Joint account you can save up to $500,000 securely.
Credit Union vs. Bank: Which One is Better for Your Money?
Both are good options, but you need to verify your current situation and decide what works better for you.
Credit unions will open their doors to anyone that qualifies to become a member, and they help those with poor credit. You may be able to secure a better interest rate with a poor credit score from a credit union.
Is you live in a rural area, a bank will be a better option for you as they offer technology based conveniences for you. These services include things like photo deposits, and fee free ATMs, among other things.
If you have a big business and you need to handle your deposits while at the same time, extending credit, there isn’t any better option than a bank.
How to Decide if a Credit Union or Bank Works Best for You
To decide on the best option for you, you need to prioritize your needs.
Ask yourself what is important to you:
- Is it imperative for you that you have great customer service?
- Are you the type of person that needs to have all of your banking information at the tip of your fingers?
- Is having a branch everywhere you go, something important for you?
Depending on these responses is how you are going to move forward.
Do you use a credit union or a bank? Let us know in the comments!