In case you are wondering which is better between a credit union and a bank, then you are on the right page. The most important difference between these two is that banks work to generate profits for their shareholders while credit unions don’t care much about profit and focus more on providing their members with quality banking solutions. If you’re looking for a reliable credit union, you can simply search online for the one closest to you.
To truly know which is better between these two, you must first understand what each one is and what they have to offer.
What is a Credit Union?
A credit union shares a lot of similarities with a regular bank. However, in most cases, a bank is larger in size. Unlike banks, credit unions are nonprofit and are overseen by volunteers. Most of these volunteers serve in different capacities.
Services offered by credit unions include; account opening, account checking with debit cards, mortgage loans, car loans, home equity loans, credit cards, and other forms of loans.
A big misconception about credit unions is that you must be a member of the armed forces or a government employee before you can join. Some people also believe that their savings won’t be insured as it is done in normal banks. All these are not true.
Suppose you are not sure if you qualify to join a credit union, maybe because you don’t belong to any of the categories mentioned above, you can easily visit the nearest credit union for more information on how to get started.
What Are the Advantages of a Credit Union?
Since credit unions are non-profit-oriented, they do not have shareholders to report to. By not focusing on profit, their rates are often better compared to banks.
- Better Interest Rates
An important difference between banks and credit unions is their interest rates. Banks tend to charge more interest rates on loans, while credit unions offer a considerable interest rate. Also, credit unions offer better returns on savings when compared to banks.
- Lower Fees
Credit unions do not only offer good interest rates. They also help customers save money by offering lower overdraft fees and bank rates. According to a 2016 survey, 76% of credit unions required no minimum balance to get out of paying fees.
What are the Advantages of Banks?
- Advanced Technology
Banks are well known to be at the top of their game when it comes to rolling out new technology for their customers. They do this by partnering with tech companies to meet the needs and expectations of their customers, especially millennials. On the contrary, credit unions don’t put much consideration into meeting up with the latest technological trends.
Although the latest banking technologies end up trickling down to the credit union, it takes time. For example, most credit unions recently introduced online banking to list their services. Some have also started working with third-party tech firms to help with fintech services.
- Higher Customer Brand Awareness
Increasing brand awareness is an important area where credit unions are lagging. This happens because they do not set aside enough marketing budget as their bank counterparts. Banks are always at the forefront of paying for commercials to create brand awareness among younger generations.
- A High Number Of ATMs And Branches
Although credit unions are known to offer lower rates, they do not have a large network of branches and ATMs. Most banks have a large number of branches and ATMs, which makes it easy for their customers to have access to services without having to travel miles. Also, millennials can easily carry out transactions through ATMs.
Why Choose a Credit Union Over a Bank?
Customers that care only about rates and like the community feel and settings can opt for credit unions. For people who are looking to reduce their cost of banking in the long run, credit unions are better for them. This is because of the cheaper rates being offered. However, if you want something more complex financially, are looking to start a business or in need of outstanding investment products, you should opt for a bank.
Credit unions and banks are both beneficial. As such, your choice should be based on your banking needs. Whether you prefer banks with branches and ATMs you can access or a credit union where you can save money with excellent interest rates, there is a befitting option for you.