Credit unions have increased in popularity ever since the financial crisis. With the Occupy Wall Street movement and Bank Transfer Day, many people have become more skeptical of large banks and their profit-making measures. As a result, a lot of consumers have turned towards credit unions as a safer way to store their money. But don’t just automatically switch to a credit union because everyone else is doing it. There are pros and cons to both credit unions and banks. Check out the following before deciding what’s best for you.
What is the difference between a credit union and a bank?
The first thing to do is understand how credit unions and banks work. Both credit unions and banks act in a similar fashion, so it can be hard to decide which one to use. As financial institutions, they offer many of the same products and services, including savings accounts, checking accounts, ATM/debit cards, credit cards, mortgages, auto loans, and more. Both can lend you money and accept deposits.
Although both store your money and offer financial products, they operate in different ways. A credit union is a non-profit organization. Because of this, they can offer higher interest rates on saving accounts and CDs, and lower interest rates on loan products and credit cards. Another large difference is that credit unions are cooperatives. Customers pay an initial membership deposit, and they are then a part owner of the credit union. They will get a say in all the credit union’s decisions; however, the member must meet all the membership requirements. Furthermore, credit unions are meant to serve local communities, so they are often not available outside of a certain area. When a consumer uses a credit card at an ATM, they may be forced to pay ATM fees. Luckily, many credit unions will reimburse consumers for these fees, but it may only be up to a certain amount.
On the other hand, banks are often much larger than credit unions. As a result, banks can offer much more variety and consumers enjoy the ease of a big company. Banks ATMs are plentiful, and branches are available at most times (including weekends). Many big banks offer 24 hour customer service too, so consumers have access to help whenever they need it. In addition, banks have great mobile and online tools that customers can use. There are also more loan and account options for account members. However, since a bank is a large company, individual customers do not have the same amount of influence. Banks are accountable to their stockholders, not every member of the bank.
So, where should you put your money?
There is no right or wrong answer to this question.! Where you should put your money depends on your needs and values. If you’re looking for a simple loan or account, you should definitely take a look at credit unions as well as big banks. Members of a credit union often pay higher interest rates on all deposit accounts, but lower loan and credit rates. They can also have lower fees, and there is much more focus on the customer. But, if you have a large financial portfolio and are looking for high-yield savings and money market accounts, you may want to stick to the large retail banks.
