Did you know that April is National Credit Union Youth Month? In conjunction with this month’s Financial Literacy, this year’s ‘Wild About Saving‘ theme encourages our youth to start thinking about their financial future. You may find local credit unions offering deals when opening a new account and other community outreach events to educate young people.
If you’re wondering what the difference between a credit union and a bank is, here is a simple breakdown:
A Credit Union is Not For Profit
These organizations exist to serve their members rather than maximizing corporate profits. This means that they are democratically operated by those who are apart of the credit union, allowing all account holders equal say regardless of the amount of money they contribute to their accounts. This usually makes fees and loan rates lower, and also rewards their members with dividends and higher interest rates when it comes to savings accounts.
However, consumers cannot open an account at any credit union they choose. There are certain rules and consumers must meet certain fields of membership that include employee groups, associations, and residential areas. They sometimes require direct deposit as well as opening a savings account.
Although many credit unions may not have ATMs all over the country, many offer a certain number of withdrawals from out-of-network ATMs per month as well as the use of sister banks or ATMs within certain pharmacy’s or grocery stores.
Looking to build an emergency fund or a long-term savings account? Credit unions typically offer higher rates of return and concentrate on better savings products for the members like CDs and money markets.
A Bank is a For-Profit Corporation
Banks are owned and controlled by their stockholders, with declared earnings paid to them only. When you deposit your money into a bank you’re loaning money to that bank. Think of a bank as a business, the money you give them is used to create profits by investing that money or loaning it to others.
Large banks have ATMs around every corner. This is one of the major perks of choosing a larger bank. Although credit unions are catching up, when it comes to advanced technology, banks usually have more options for bill pay, customer service availability and overall convenience.
What Is Right For Me?
It really depends on what you’re looking for. If you’re opening your first bank account and your focus is to simply deposit money and start a savings account, I would suggest using a credit union. If you’re going to be making regular deposits or need access to tellers and ATMS, a larger bank may be a better option.
Remember, you are free to do both if you choose. I know many people that take portion of their check each week and directly deposit it in their savings account at a credit union and they never see it. While they keep their checking account active at a larger bank.
To speak to a credit counselor today about budgeting and managing your finances, call 800-769-3571.