Banks vs Credit Unions: What's the Difference, and Which One is Right for You?
Have you wondered what the differences are between Credit Unions and Banks? How are they similar? What is the right option for you? Learn more here!
How are Credit Unions and Banks Different?
When you were younger, your parents or older relatives may have mentioned to “get in with a credit union.” Or maybe you heard about them from a classmate in college who was all about raging against Wall Street bankers. For many of us, it was considered a rite of passage, or you were doomed to pay higher rates or devastating interest if you didn’t partake in the glory of a credit union. So as naive teenagers or young adults, we blindly agreed with our parents, friends, and relatives and signed up for a credit union without really knowing why. Even today, do you genuinely know the difference between credit unions and banks? We know that it can be confusing. We’re here to help.
On the surface, they look similar - credit unions and banks are both financial institutions that offer a variety of services to their customers, including checking and savings accounts, loans, and credit cards. However, key differences between the two can drastically affect how your money is managed. It’s like comparing a red delicious “credit union” apple to a standard “bank” tomato. Sure, they’re both red and can be delicious if appropriately prepared to your liking, but they vary in texture, purpose, and overall functionality. What you want depends on what you’re cooking, right?
One major difference is that credit unions are not-for-profit organizations, while banks are for-profit companies. Credit unions are owned and controlled by the people and for the people. In contrast, Wall Street-type shareholders own banks, so, at the end of the day, banks' priority will ultimately be those shareholders. What does that mean for you? Credit unions can offer lower fees, loan interest rates, and higher-than-average interest on savings and checking accounts.
Want to be pro-community? Credit unions are a good choice if you're looking for a financial institution that is more closely tied to your community. Credit unions are typically smaller and more community-focused than banks. Many credit unions are chartered to serve specific groups of people, such as employees of a particular company or members of a certain organization. On the flip side, banks are typically open to anyone but can be very selective in whom they choose to serve.
Because of their smaller, community-oriented focus, credit unions can focus more on championing in favor of the little guy on their path to success. They also tend to have more flexible lending policies, making getting loans easier for people with less-than-perfect credit. Many even have programs to help members improve their credit, and they may be more willing to work with you if you have a financial hardship.
On the other hand, banks tend to have more branches and ATMs than credit unions. More recently, they are going primarily digital and closed many of those branches in communities that need them. Credit unions are trying to fill those gaps as much as possible. Banks may also offer more advanced online and mobile banking services. However, credit unions are changing daily with consumer demand for digital innovation. Many now feature cutting-edge technology and digital tools, just like banks. Also, many credit unions have partnered together to bridge location gaps through shared branching networks such as the CO-OP network. With this network, you can do many of the same transactions at different credit unions rather than your “home” credit union, allowing members to travel without sacrificing convenience.
Is a Credit Union or Bank Better For You?
Ultimately, choosing a credit union or a bank will depend on your individual needs and preferences. Both types of financial institutions can be a good choice. Still, credit unions may be the right choice if you're looking for lower fees, better interest rates, and more personalized community-based service.
It's essential to do your research and compare the fees, interest rates, and services offered by credit unions and banks in your area. Be sure also to check the reviews, ratings, and customer satisfaction of the financial institution you're considering. With this information in hand, you'll be well-equipped to decide where to put your money and not just do what your parents have told you.
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If you are interested in joining a credit union, we invite you to take a look at what Blue Federal Credit Union has to offer. Take a look at how you can join today!
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