When it comes to choosing the right financial institution, making the wrong decision can leave you with results that are far less than what you expected. In years past, almost everyone dealt with banks, but these days credit unions are chipping away at the bank monopoly. Here are the real differences between banks and credit unions.
Different Types of Credit Unions
There are two different types of Credit Unions i.e. Financial Credit Unions and Federal Credit Unions. Federal credit Unions are insured by the National Credit Union Share Insurance Fund, or NCUSIF, which is administered by the National Credit Union Administration. This is a federal insurance fund backed by the U.S. government that covers deposits of up to $250,000.
Financial Credit Unions or “State Credit Unions” are chartered by the state and may follow different regulations. The main difference between a “Credit Union” and a “Federal Credit Union” is how the union is regulated. Other than this slight difference, differences between a federal credit union and a credit union are much less significant than the differences between a credit union and a bank.Â
Fees and Interest Rates
Whether you want to open a savings account or seek a loan to buy a car, you will likely experience lower fees and interest rates if you do so through a credit union. This is due mainly to the fact that credit unions are nonprofit institutions, while banks are for-profit institutions and need to make more money to please their investors. When you deposit money into a credit union account, you become a member of the credit union. If at the end of the year there is “surplus capital” often the credit union will choose to distribute bonus dividends to their members.Â
Better Apps and Technology
If there is one area where banks have continued to maintain a sizable advantage over credit unions, it is in the area of technology. Specifically, most commercial banks are still far ahead of credit unions in terms of offering customers easy-to-use apps for conducting business via their smartphones. Although credit unions are closing the technology gap, banks still rule supreme in this area.
Excellent Customer Service
If you want to do business with a financial institution that emphasizes a local approach and prioritizes personalized customer service, it is almost impossible to beat credit unions. As you’ve seen over the years, banks can change ownership very quickly, leading to mergers and the forming of new companies that can leave customers confused and anxious about their money. If you prefer going where everybody knows your name, use a local credit union.
Multiple Branches and ATMs
Should you be someone who is on the go quite frequently and finds yourself in different areas of the nation, you will always find that most larger banks have multiple branches in towns and cities that you can stop by if needed. Banks also offer ATMs nationwide, meaning you will likely never be anywhere that won’t have an ATM nearby should you need a quick withdrawal of cash.
Even though there may not be a local branch of your credit union nearby they do cooperate with other credit unions and are members of ATM networks such as the “Allpoint ATM Network” which provides access to over 55,000 ATMs worldwide. Often access is free of surcharges members. Most also offer “online banking” so you can pay bills, transfer money, and even deposit checks electronically.
Since banks and credit unions both have pros and cons, you need to decide for yourself which services are most important for you and your financial picture. If you want to pay fewer fees and lower interest on your loans, try a credit union. However, if you want access to more services and branches nationwide, a bank will be your best bet. Whatever choice you make, do what’s best for you and your money.
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