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Credit Unions vs. Banks

Is it really that important Bank With Credit Unions if you do your financial affairs at a bank, credit union, or other institution? Many people believe it does. Credit unions are believed to offer the lowest interest rates for loans, credit cards, and banking.

What is a credit union?

The fact that credit unions are owned and managed by their members is what makes them different from banks. The Credit Union’s members elect their Board of Directors, which are usually volunteers, through a one-person-one-vote system. According to the World Council of Credit Unions, credit unions are cooperative non-profit institutions. Credit unions tend to be smaller than banks.

What is the difference between credit unions and banks?

The average assets of banks in the United States are $1.53 billion, while credit unions have an average of $93 million. Many credit unions offer the same services as banks, including checking accounts, savings accounts, credit cards, and loans. 

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These banking functions are sometimes called share accounts, share draft account or share term certificates by some credit unions. These services can only be used by credit union members. To join a credit union, you must be eligible.

Banks are owned by profit-sharing companies and are subject to regulation by either the state regulators or the federal government. Banks are insured by the Federal Deposit Insurance Corporation (FDIC). Banks exist to make money for shareholders.

Credit unions have many advantages

Credit unions are not publicly traded companies so they can generally offer lower rates on loans, credit cards, banking, and savings accounts. Although credit unions are not insured by FDIC, they do have federal insurance called the National Credit Union Share Insurance Fund. 

While most credit unions are financially successful, this money can be used to lower loan rates and fees where possible. Some credit unions offer bonus checks to their members when they have particularly high earnings, as members are also the owners of the credit union.

Customer satisfaction

Credit unions are almost always better than banks when it comes to customer satisfaction in financial surveys. This could be due to the fact that customers feel like they are part of the institution and not just a customer. 

This could lead to greater satisfaction in the financial experience if the primary goal of an organization is not to make a profit but to help members become financially secure. Credit unions can be smaller than traditional financial institutions and are easier to get to know their employees.

Banks have many advantages

While credit unions have the best reputations, you might be tempted to open an account at your nearest credit union. However, banks also have strengths. The best rates for financial products may be offered by larger banks. 

Before opening an account, do some comparison shopping. Banks generally offer more services and products than small credit unions. Credit unions might not have access to as many online banking services or customer service lines 24 hours a day, but banks may. Compare your options when opening an Account.

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