Are you trying to decide between a credit union or a bank for your personal finance needs? In this article, we break down the differences between credit unions and banks to help you make the right decision for your situation.
Credit Union or Bank: Which is Right for You?
What is a Bank?
When you think of where money is stored and exchanged, you probably first think of a bank. Banks offer the benefit of generally being more structured and accessible. They typically have many branches in a specific region, or across the country, depending on their level of operation.
Banks offer a more sophisticated level of technology. Usually, because they receive more funding and have for-profit status to assist them with growth and development.
Some of the most well-known banks are Wells Fargo, Chase, Bank of America, PNC Bank, and US Bank. Banks tend to exist at a national level. Although, there are some chains that are certainly more prominent in specific states and regions.
What is a Credit Union?
Credit unions typically offer better levels of customer service, as well as higher interest rates on deposits and lower rates on loans, according to Nerd Wallet. Credit unions typically have lower barriers to entry and accept customers with less than favorable credit history and complicated financial situations.
Regarding structure, credit unions “range from small, volunteer-run organizations” to much larger organizations with thousands of members manned by a board (Listen Money Matters).
Most credit unions are regional, but some of the most popular examples of credit unions are Alliant Credit Union, First Tech Federal Credit Union. The largest credit union in the United States is the Navy Federal Credit Union.
What’s the Difference Between a Credit Union and a Bank?
The biggest difference between credit unions and banks is ownership: credit unions are non-profit organizations, while banks are for-profit. Credit unions exist to serve their customers and are owned by their customers; banks exist to serve their shareholders and are owned by their investors. Depending on the size of the bank, this could happen by a handful of investors or thousands of anonymous stockholders.
Credit unions are more community-based – they serve the greater population. In recent years, there’s been a public shift in preference towards credit unions, which are generally seen as more trustworthy than banks. For the most part, credit unions will offer you better deals (but they aren’t always more affordable).
One of the most important things to know about credit unions is that they are required to limit their customer base to a group of people who share a common bond, which is referred to as the “field of membership” (The Balance). This field of membership can be set by a number of qualifications, including your industry, region, or some sort of organizational eligibility. This is the case with the Navy Federal Credit Union. They serve military members, the Department of Defense, veterans, and the family members of these employees.
For the most part, banks and credit unions offer very similar product offerings: personal checking and savings accounts, business checking accounts, certificates of deposit, home and auto loans, and other types of loans.
How to Decide Between a Credit Union or Bank?
When you’re deciding between a credit union or a bank, there are several factors you should take into account. Ask how much each institution charges to set up and maintain a checking account. Make sure to ask if there are any monthly maintenance of overdraft fees.
Also, do some internal reflection – What’s your personal history? What are you looking for in your financial institution? Having answers before you look at potential financial institutions will help you make the best decision for you.
Author Bio: Trevor McDonald is a freelance content writer who has a passion for writing. He’s written a variety of education, travel, health, and lifestyle articles for many different companies and is currently writing for Audi Marietta. You can find him running with his dog, playing guitar or outside enjoying any type of fitness activity imaginable.