When you’re deciding whether to open a new account or thinking of switching your existing account, you may wonder: Should I go with a bank or a credit union?
In terms of convenience, there are fewer differences between the two today, especially if the credit union you’re considering has good online services and is a member of a co-op that gives you access to branches and ATMs nationwide.
Banks and credit unions both provide equivalent protection for your money through federal government-backed insurance.
Consider what is most important to you while researching banks and credit unions, such as a large number of ATMs or the lowest fees on a checking account.
Membership and ownership
Credit unions are nonprofit organizations that are owned by their members; according to the Credit Union National Association, 120 million Americans are members of one.
Banks must generate a profit for their shareholders, whereas credit unions do not have to create a profit for their members.
Instead, their goal is to maintain their costs as low as possible, to have their savings interest rates as high as possible, and to set their lending interest rates as low as feasible.
Credit unions are required to restrict their consumer base to what is known as a “field of membership.” A company where people work, a school or place of worship, a geographical area, or membership in an organization are all examples of this.
National credit unions think outside the box to expand membership eligibility. Connexus, for example, offers membership through its association, which costs $5.2 per year.
Members of credit unions can also vote on credit union policy and participate in decision-making; clients of banks do not have this option.
Credit unions typically offer fewer products than banks, particularly in the commercial banking sector. Credit unions, which are often much smaller than banks, typically provide fewer investment products, such as checking and savings accounts, as well as credit cards.
Credit unions, in many instances, offer the lowest interest rates on loans such as vehicle loans and mortgages. In terms of interest rates on savings products, credit unions are likely to provide greater rates than banks.
Using data from S&P Global Market Intelligence, the National Credit Union Administration examines interest rates on savings deposits and loans for banks and credit unions on a regular basis.
3 According to its 2020 third-quarter table, credit unions offered higher interest rates on CDs, money market, and savings accounts—but lower interest rates on most home and auto loans.
Many credit unions provide checking accounts with no minimum balance requirements and no monthly service fees. Fees for banking errors, such as a bounced check, may be lower at a credit union than at a bank, depending on the credit union.
Technology and Online Services
Unlike many local credit unions, national and worldwide banking organizations can have large resources for technology. However, you can locate national credit unions with digital banking choices that offer the majority of the services you require.
Make sure to inquire about credit unions’ mobile banking technology and to review their websites for ease of use and offerings.
Membership and ownership
Banks are owned by investors and run as for-profit businesses, thus they must produce a profit for their shareholders. Individuals and businesses alike are eligible to open a bank account.
Customers have no vote or voice in how a bank is governed, as opposed to a credit union, which has a membership. You are a customer at a bank. You are a member of a credit union.
Banks provide both personal and commercial banking services, such as company credit cards and loans. Individual Retirement Accounts (IRAs), certificates of deposit, and money marketing accounts are examples of investment and savings vehicles offered by banks.
When looking for a loan of any kind, it’s usually a good idea to check with both your local banks and credit unions. Online banks may provide cheaper rates than brick-and-mortar institutions with an online presence, but banks often cannot compete in this field with credit unions.
Banks have more and higher fees than credit unions because they must make money for their stockholders. Banks frequently have restrictions on free checking accounts, such as minimum account balances or requirements for additional account types (like mortgages or credit cards).
Banks also charge additional fees for errors, such as a rejected check or overdrafts, especially if you don’t qualify for a premium account. Again, while investigating banking fees, it’s critical to compare both online banks and brick-and-mortar businesses.
Technology and online services
Large banks have more money to spend on technology, thus they are known for expanding technical services considerably faster than credit unions. Banks’ mobile banking services are anticipated to be significantly more advanced.
If technology and online banking are important factors in your decision, develop a list of your must-have services and request a demonstration before opening an account with a bank or credit union.
No, bank and credit union accounts are both insured for up to $250,000 by the FDIC (banks) or the National Credit Union Administration (credit unions).
Account managers should be contacted if you have more than $250,000 to deposit at a bank or credit union.
When it comes to convenience (access to ATMs and branches) and technology such as mobile banking, most credit unions cannot compete with banks.
In terms of technology, many credit unions cannot compete with internet banks. Credit unions may offer lower loan interest rates, but their range of financial products may be limited in comparison to large banks.
Credit unions will almost certainly provide you with lower-cost services as well as superior interest rate possibilities for both loans and savings.
Banks will almost certainly offer additional services and products, as well as more modern technology. You’ll need to examine aspects like these while determining which type of institution will best meet your needs.