Are a credit unions the same as banks? Is one better than the other? Can I start an account at any credit union? Which is better for starting an emergency fund or long-term savings account? Understanding the differences is important for knowing whether you should keep your money in a credit union, a bank, or both!
Differences Between Credit Unions vs. Banks
Non-Profit vs For-Profit
The fundamental difference between these financial institutions is that credit unions are nonprofit financial cooperatives while banks are for-profit corporations. This means that credit unions exist to serve the best interests of their members whereas banks operate to maximize profits for their shareholders.
Interest Rates & Fees
The noticeable differences that consumers will see are that credit unions will be able to offer higher interest rates for return on savings accounts and lower fees and rates on personal loans and other products. Banks, on the other hand, are generally able to offer more convenience for personal banking services since they have branches and ATMs spread across the nation.
Eligibility Based on Location
Another important difference is that credit unions will often have eligibility restrictions based on geographic location, employment type, and even religious affiliation. As a result, consumers will need to research credit unions in their region to see which ones are available to join.
Use One or Both?
Due to the differences in how a bank and a credit union operate, many consumers choose to utilize both types of institutions. Larger banks might be a better option for credit cards and checking accounts that are used to pay bills or access cash on a daily basis, while credit unions could serve as a good location to keep a savings account or emergency fund that will not need to have funds withdrawn frequently.
If you don’t have funds set aside for unexpected expenses, use our emergency fund calculator to know how much you may need to save. Then research credit unions in your area to find a good option for saving money to help on those “rainy days.”
If you’re struggling with credit card debt or need help with budgeting, contact American Consumer Credit Counseling for a free counseling session. Call 800-769-3571 today!