Choosing the perfect place to manage your money can be confusing. Although one has the option to choose between banks and credit unions, finding the right one is like searching for a needle in a haystack. Here is a brief rundown of the main differences between banks and credit unions.
Member or Corporate Ownership
Banks are for-profit organizations and are run by investors and corporations, while credit unions are nonprofit entities that are owned by its members. Each time a member makes a deposit, they are purchasing shares in that financial institution. Every credit union member has a say in how his or her financial institution is run.
Similar Products and Services
Since credit unions and banks are competitors, they offer many of the same products and services. Regardless of whether you need a loan or a checking or savings account, the main difference between them are the rates and terms. While one may find better rates at credit unions, the variety of products and services are often more diverse at banks. Credit unions offer better rates on their savings, CDs, and money market accounts. Banks offer more ways for account holders to manage their money, without them having to set foot inside of a branch. Banks also offer more rewards for customers that exhibit responsible financial habits.
Access to Funds
Credit unions are smaller business entities than banks. They are local and are very dependent on the communities they are located in. This can make it challenging for members that are traveling outside of those communities to have access to their money without incurring any out of network ATM fees. Banks are much larger corporations and have thousands of ATMs all over the world. Many banks also provide their customers with alternative ways to access their money, such as money transfers, traveler’s checks, and the ability to go to nonlocal branches.
In regards to a service area credit unions are at a competitive disadvantage – but this can work in the consumer’s favor, as it is typically easier to get approved for a loan through a local credit union. Credit unions utilize what is called a loan origination system – a type of software platform that helps improve efficiency during the pre-screening approval process. Lending 360 by CU Direct is a perfect example of one such system that is specifically tailored for credit unions, not banks.
FDIC and NCSUIF Insurance
Most banks carry Federal Deposit Insurance Corporation (FDIC) insurance and most credit unions carry National Credit Union Share Insurance Fund (NCUSIF) insurance. FDIC or NCUSIF coverage means that your money is completely safe if your financial institution goes out of business. Double check for FDIC or NCUSIF deposit insurance before you become a member of any financial institution.
Quality of Customer Service
The quality of customer service that banks and credit unions provide is a toss-up. Most credit unions have a smaller customer base and are capable of providing its members with a personable experience. Banks are more formal in their approach to customer service, because they have a much larger customer base to cater to. Many banks and credit unions also offer state of the art websites, online services, and around the clock service.
If you are looking for a loan that has a low-finance rate or to save money with a high-yield savings account, you should consider opening an account at a credit union. If you are looking to diversify your financial portfolio and to take advantage of higher credit limits, you should consider going to a bank. On the other hand, you could open accounts with both types of financial institutions. Ultimately, there is no such thing as a perfect bank or credit union. It is best for one to consider their individual needs and preferences before choosing any particular bank or credit union to do business with.