Considerations When Deciding Where To Do Your Banking
If you pay attention to the news and politics there is very often a lot of negativity surrounding “big banks”. We regularly see reports of new legislation designed to curb their influence and change banking practices. As credit union have become very available to the public, many consumers are turning to this non-profit option as an alternative. There is still much confusion about the difference between a bank and a credit union. Understanding what makes them alike and different will help consumers decide which they feel is the best option for their finances.
The Difference Between a Credit Union and a “Traditional” Bank
When it comes down to it, the primary difference between a Credit Union and a Bank is profit. Credit Unions exist as non-profits. Banks are for profit institutions. In the past, Credit Unions were established to offer specific members an alternative option to banks. Membership was often based on things like where you worked, your membership in particular groups, or other factors that determined your eligibility. Today this has completely changed – many credit unions are open to the public. There are many credit unions open to the public – it is worth noting that many still require specific eligibility requirements – which means just about everyone has the option to join a credit union.
Because Credit Unions are not bound to profits they are often able to offer higher interest rates for savings account, lower interest rates on loans, and strive to have a more “personal” feeling. This, however, is not a hard rule. The best interest rates and the best customer service is going to vary based on many factors.
On the surface it may seem that the choice is obvious – bank with a Credit Union which is designed to put their members first. There are some disadvantages to consider as well. Most notably, Credit Unions are often regionally based. This means that they have far fewer locations than many of the “big banks”. Additionally, it is not uncommon for Credit Unions to be very slow to adopt new technology. If you are used to using an app like the Bank of America Banking App you may find some features not available with a Credit Union App – though, this is becoming far less of an issue as technology makes even a less than perfect banking app very serviceable.
Security and Bank Insurance
Both Credit Unions and Banks are going to be very safe in terms of security. If you have an account with either type of financial institution you will be protected from fraudulent access to your accounts. For instance, if you have had unauthorized charges made to your account (through a debit card or otherwise) you would be protected in both circumstances just the same. Federal regulations require both banks and credit unions to treat unauthorized charges to account holders identically.
In terms of insurance, you can expect many of the same features as well. Banks are required to carry $250,000 in protection for all accounts through the FDIC (Federal Deposit Insurance Corporation). Credit Unions are required to insure their accounts for the exact same amount. The insurance for Credit Unions is managed through the NCUA (National Credit Union Administration). In both cases your deposits are insured for equal amounts and with the same protections.
Sign Up Offers For New Members
At Credit Liftoff we are always looking for great deals for consumer finances. We recently published our list of the Best Banking Sign Up Offers for new customers. One thing that you will see missing from that list is the inclusion of a single credit union. New customer bonuses are extremely rare for credit unions. Unlike banks that are constantly trying to attract new customers, Credit Unions are more focused on providing their current members with better services. Your options are going to be mostly limited to banks if you are looking for a big bonus when opening up a new account.
Do Banks and Credit Unions Offer The Same Services?
Services offered is going to vary based on the institution but for the most part customers will find nearly identical services offered with both banks and credit unions. Common banking services which are typically found at a Bank or a Credit Union include:
- Checking, Savings, and CD Account Options
- Access to debit and credit cards
- Loan services including auto, home, and personal loans
- Investment Services
- Online Banking
- Smart phone apps for digital service
One of the big concerns consumers face when choosing between a Bank or a Credit Union is whether or not you will have access to everything offered with a bank. Potential customers should check with the institution they are interested in doing business with but will typically find that the services are very similar. It is also worth pointing out that many banks and credit unions are offering student loan refinancing which is becoming a huge draw for many young adults.
Do Credit Unions or Banks Charge Lower Fees?
For the most part, Credit Unions typically charge members lower fees than banks. This would include services like checking and savings account maintenance fees. Customers will also find that the minimum requirements to waive their banking fees are usually lower dollar amounts with Credit Unions than they are with Banks.
It is important to point out that one aspect where Credit Unions lack is in terms of ATM fees. Big banks often have huge networks of ATMs located throughout the country. These ATMs will allow you to withdraw funds at no cost. Credit Unions are regional and therefore you are much less likely to find an ATM which charges no fees. There are associations many Credit Unions join to offer free ATM services. If you bank with an Credit Union it is smart to find a no fee ATM and be sure to use that for all of your ATM transactions.
Making a Choice – Bank or Credit Union
- Is the latest technology important to you?
- Are many physical locations throughout the country a priority?
- Do you prefer to do business with a non for profit?
If any of the above questions is something you feel strongly about, this may be your guiding factor when making your decision. Banks are typically going to have the latest tech options and many more locations. Conversely, if you prefer to do business with a non-profit, a Credit Union will be the way to go.
Ultimately, the decision should come down to what you feel best about. There are many people who do not have a good feeling about banking with a large institution. These people often prefer a local feel when they decide where to place their money. This is one of the driving factors which is making credit unions popular options. If you do not care about profit vs non-profit, it is going to be best to look at the fees charged and services offered and make your decision based on what will be best for your finances.
Do you use a bank or credit union? Why did you make that choice? Let us know in the comments below!