Credit unions and banks offer many of the same services such as checking accounts, savings accounts, personal loans plus much more. However, they have their differences too.
Credit unions are not-for-profit organizations that exist to provide their members a better rates and fees and offer superior customer service, while banks are for-profit and can offer more innovative products along with keeping up with the latest technology.
For those of you in the market currently looking for a reliable financial institution to keep your money and conduct your day to day banking needs, make sure you read on as we have conducted a Credit Unions vs. Banks Comparison list below for your easy browsing and hopefully can assist you in making a suitable selection on where’s the best place to put your cash and determine which one is better?
Eligibility Requirements
A commercial bank will have no eligibility requirements. However, a credit union, by law, must have restrictions based on membership to an organization, geography, or some other affiliation. Once you qualify though, you will qualify for life even if the affiliation changes.
Geographic Footprint
Credit unions, because of their size, have a much smaller geographic footprint. They work around this by joining other ATM networks to spread their reach. Recognizing their geographic limits, some credit unions will offer ATM rebates or reimbursements to work around this limit.
On the other hand, not all credit unions are limited geographically. Some have a large number of branches in multiple cities and states. This is a pretty big accomplishment considering Wells Fargo has over six thousand branches and Bank Of America has over five thousand.
FDIC vs. NCUA Deposit Insurance
Credit unions and banks are both protected by a form of deposit insurance, but they are both two different organizations.
Credit unions are federally insured up to $250,000 by the National Credit Union Administration (NCUA). Commercial banks are federally insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC). Both organizations are backed by the credit of the U.S. government.
Interest Rates
Generally, credit unions tend to offer higher interest rates on deposits and charge lower interest rates on loans because they are owned by the depositors.
This is only true when you compare credit unions to commercial banks. But if you add online banks into the equation, you will see that they offer much higher rates on high yield savings accounts and money market accounts.
Loans tend to be offered with lower interest rates from credit unions because they’re trying to maximize financial benefit to depositors. Commercial banks do the opposite because they are trying to maximize profit for their shareholders.
Credit Unions vs. Banks Differences
- Ownership: Credit unions are owned by their customers, while banks are owned by investors (those investors might be thousands of stockholders or a few large investors). You might not think it’s a big deal or won’t affect you, but the ownership structure affects how these institutions operate.
- Credit Union Eligibility: Your ability to open an account is another major difference between banks and credit unions. Below are the typical eligibility requirements to join a credit union:
- Employers – Many employers sponsor their own credit unions
- Family – Family Family Most credit unions allow members’ families to join
- Geographic Location – Many credit unions serve anyone that lives, works, worships or attends school in a particular geographic area
- Membership In a Group – Membership in a group, such as a place of worship, school, labor union or homeowner’s association may qualify you to join
- Anyone can join – Some credit unions will allow you to join by making certain amount of donation to a specific organization or join certain association that’s in their Credit Union’s Field of Membership list
- Higher Interest Accounts: Credit union operate on a not-for-profit business model, therefore they generally pay a higher interest rate on savings and CDs than banks that have to pay their profit margins.
- Checking Account fees: Credit unions return profits to their owner-members, which means account fees can be kept to a minimum. You can most likely enjoy free checking at a credit union without all of the account restrictions that some big banks have.
- Customer Service: When you need assistance or financial advice on your account, big banks may make you navigate through long voicemail options or automated email responses before you reach a live person. Since credit unions are small businesses, it’s often much easier to get person-to-person service.
- Online Management: Large banks have vast IT departments and they typically have the latest technology and mobile app available for you to manage your accounts on the go. On the other hand, credit unions are a bit more old fashioned, they should at least have the basic online features such as: account balances, transfer capabilities and online loan payments.
- Loans: Because of its unique ownership structure, a credit union doesn’t have to abide by loan restrictions and qualifications mandated by large corporations. And being a not-for-profit organization means a credit union doesn’t have to charge enormous interest rates, either therefore credit union loans are generally cheaper.
Credit Unions vs. Banks Similarities
- Insured deposits: Bank accounts are insured by the Federal Deposit Insurance Corporation (FDIC) whereas the National Credit Union Administration (NCUA) insures credit union deposits. Both the FDIC and NCUA are backed by the full faith and credit of the U.S. government and individual accounts are protected up to $250,000.
- ATM Accessibility & Fees: Big national banks have more ATM and branch locations, which means better convenience and able to avoid fees associated with using another bank’s ATM. But just like banks, credit unions are connected to national ATM networks for easy member access just about anywhere – and many credit unions reimburse the ATM fees you may be charged.
- Similar Product Offerings: The products available at banks and credit unions are virtually the same. They tend to offer the following products:
- Business bank accounts
- Checking accounts
- Savings accounts
- Certificates of deposit (CDs)
- Home loans (including purchase loans and refinancing)
- Auto loans for new or used vehicles (including motorcycle and RV loans)
- Money market accounts
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Bottom Line
Above are the general points we touched up on Credit Unions vs. Banks Comparison. In terms of which one is better? They both can meet your banking needs, so it ultimately comes down to the products, services or fees offered by the individual institution you’re currently interested in.
If ownership is not a major concern to you, then just choose whoever has the best deal. For instance, if you are thinking of getting a loan, simply compare the costs and interest rates at each institution, then ask whether or not you’re likely to get approved for the loan before you fill out the application.
Feel free to comment below and let us know your preference. Also, don’t forget to read our full listing of Credit Unions Anyone Can Join and also check out the latest Bank Bonuses nationwide for all your banking needs!
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