credit union vs bank which should you choose
Credit Union Vs. Bank: Which Should You Choose?
Wondering who will win the age-old financial debate of credit unions vs. banks? This Buzzle article will tell you about the pros and cons of both, credit unions and banks, which will help you make the right investment decision.
Did You Know?
In the entire history of US credit unions, taxpayer funds have not been used even a single time to bail out a credit union. However, there have been a few cases of bank bailouts using taxpayer dollars, including the Savings & Loan Crisis in the 1980s and 1990s. Credit Unions Vs. Banks
Interest Rates
Credit Unions
They have lower loan rates and higher deposit rates in order to return the earnings back to the members.
Banks
They have lower deposit rates and higher loan rates in order to make profits.
The Verdict: Credit Unions
Products and Services
Credit Unions
Most of the credit unions have a traditional setup, and may not offer too many different products and services.
Banks
Due to competition among banks, they keep on introducing new products and services which prove beneficial for the customers.
The Verdict: Banks
Customer Service
Credit Unions
They have a more informal kind of customer service, as there are limited number of members and employees. Customer service executives may know the members personally. They may not offer round-the-clock customer service or too many online services.
Banks
Banks have excellent customer service which works 24/7. They also offer a wide range of online banking services which makes transactions extremely easy for the customers. Though the customer service executives are formal in their approach, in most cases, problems are solved immediately.
The Verdict: Banks
Ownership
Credit Unions
They are owned by members and not stockholders. As there are no outside members, and the directors also work voluntarily without any remuneration, you will benefit immensely from this kind of arrangement.
Banks
Customers of banks do not have any kind of ownership interest in the bank. Banks are often owned by investors who may not be their customers.
The Verdict: Credit Unions
Membership
Credit Unions
Credit unions are not open for public and serve only their members. The eligibility requirements may also be very strict, and they restrict the number of members.
Banks
Banks are open to the general public. There is no restriction to the number of customers, in fact, banks try to get maximum number of customers.
The Verdict: Banks
Profit Orientation
Credit Unions
Credit unions are not-for-profit financial cooperative institutions, and the earrings are distributed back to the members.
Banks
Banks are for-profit corporations which pay declared earnings to the stockholders.
The Verdict: Credit Unions
Regulated/Insured By
Credit Unions
Credit unions are regulated by the Federal government or the State based on their charter. Credit unions are federally insured under the National Credit Union Share Insurance Fund (NCUSIF). It is stronger than the banks' insurance fund.
Banks
Banks are regulated by the Federal government or the State regulators depending on their charter. Also, they are federally insured by the Federal Deposit Insurance Corporation (FDIC).
The Verdict: Credit Unions
Fees
Credit Unions
They have fewer service fees as compared to banks. They may charge late fees, but the amount goes back to the pool which provides loans to the members at lower rates. They sometimes even offer free balance transfer. Also, the minimum deposit requirement is very low.
Banks
Banks ensure that they profit by charging you fees for everything under the sun. Also, while opening an account, the minimum balance requirement must be of a considerable amount.
The Verdict: Credit Unions
ATMs and Branches
Credit Unions
Credit Unions have limited resources like ATMs and a handful branches.
Banks
Banks have a large number of ATMs and branches present at different locations.
The Verdict: Banks
More Money in Account
Credit Unions
They may have restrictions about the amount of money members are allowed to deposit.
Banks
There are no such restrictions about depositing money in banks.
The Verdict: Banks
Prime Focus
Credit Unions
They put 'people over profits'.
Banks
They put 'profits over people'.
The Verdict: Credit Unions
Restrictions
Credit Unions
As they are small institutions, credit unions may be traditionally inclined, and have lot of restrictions when it comes to giving membership, deposits, etc.
Banks
Banks are large and influential, and profit-oriented in their approach. This causes them to have lesser restrictions.
The Verdict: Banks
International Reach
Credit Unions
Credit unions generally have a local reach, and may not be present at international locations.
Banks
Banks are present everywhere, and have a wide international reach. Even when you go abroad for a vacation, you know that your bank will have a branch there.
The Verdict: Banks
Having a Say
Credit Unions
Members have the right to run for election of the board. Irrespective of the amount of deposit, members can run for election as well as cast a vote. They can also voice their opinions.
Banks
Customers do not have a voting right. Only stockholders can vote, based on the number of shares they own. Selection of new directors is often done by current directors, or by a large block of stock acquisition. Customers cannot make suggestions or bring about changes in the operations.
The Verdict: Credit Unions
Board of Directors
Credit Unions
Members who volunteer to become Board of Directors are chosen after an election. One is not paid to serve on the board.
Banks
The board members of a bank are paid, and may not necessarily represent its wide customer base.
The Verdict: Credit Unions
Membership Focus
Credit Unions
Credit unions want to work for the benefit of the members. They focus on consumer loans, savings, and providing quick and good services to members.
Banks
Banks work to earn profit and not for the benefit of the customers. Hence, they focus on commercial loans, accounts, and services that help in multiplying the income for the bank.
The Verdict: Credit Unions
Resource Sharing
Credit Unions
Credit unions share their resources like service centers and ATM centers for the convenience of the members.
Banks
The cut-throat competition among the banks does not allow them to share their resources.
The Verdict: Credit Unions