Credit unions offer members flexibility that sometimes banks can't match
Credit unions vs banks: What's the difference?
They look the same with rows of teller windows, drive-through lanes and attractive lobbies. They're both financial institutions that offer products such as checking and savings accounts to consumers. You drive through teller windows or stop in at a branch, deposit your checks or withdraw money and occasionally meet with personnel to discuss your financial needs. ATMs, debit and credit cards, loans and mortgages are all on the menu at most banks and credit unions.
The big difference in banks and credit unions is their structure. Credit unions are nonprofit cooperatives where they are owned and operated by their members and any income goes back to their members in some form. Banks are for-profit businesses owned by their stockholders with the goal of maximizing profits for the shareholders, said Pedro Hernandez, CCU Member Experience Manager at Consumers Credit Union based in Lake County with service centers in Lake County and Northwest Cook County.
Whether one is better than the other will depend on your needs and preferences. Let's take a look at the pros and cons of credit unions and banks.
Interest rates
Because credit unions operate as nonprofits, they can typically offer higher interest rates on savings accounts and CDs and lower interest rates on loan products and credit cards. Banks often cannot compete with credit unions in this category.
Fees
Most credit unions offer free checking and savings accounts with no monthly service fee. Although banks may offer free services, they often come with provisions. For example, you may need to make a certain number of deposits, write a certain number of checks and have a certain number of direct deposits to maintain a free checking account. Credit unions typically have lower overdraft fees.
Product choices
Smaller credit unions often offer fewer financial products than large national banks. For example, a credit union may offer two types of checking and savings, two credit cards, one mortgage loan, one personal loan and one auto loan. A bank may offer five different types of checking and savings accounts, many different credit cards and a lot of loan and investment products plus wealth management and retirement planning. Of course, there are many credit unions that offer all of these services, you just need to find the right fit for your needs.
Online presence
Credit unions may choose to economize on bank technology and may stick with the basics on web-based and mobile features. Banks offer banking services entirely online in an easy-to-use format and issue electronic bank statements.
Convenience
Credit unions are smaller-scale establishments with a limited number of branches, shorter business hours and fewer ATMs. Large banks have branches and ATMs all around the country, and banking online and transferring funds via phone are common, everyday banking options.
Customers vs. members
Credit unions serve their members, which are normally eligible for credit union services based on specific geographic areas, employee groups, associations or fraternal affiliations. However, credit unions' fields of membership have expanded in recent years. Banks serve the general public; anyone can walk into a bank and open an account or apply for a loan.
Service
Because credit unions serve smaller groups of people, they may offer more personalized service and even remember your name. If you have a blemished credit history, issues with employment or lack of a large deposit, they may be able to work with you. On the other hand, banks may deny your application for a loan or credit card based on their more stringent requirements.
Rewards
Credit unions may offer fewer reward programs and signup bonuses in the credit card market than banks offer.
Brand awareness
Credit unions may choose to economize on major marketing and advertising campaigns, while some national banks spend much more money on large marketing budgets and use billboards, other advertising and commercial time to build awareness of their brand.
Insurance
Consumer deposits in both credit unions and banks are safe and insured by the federal government.
This article is sponsored by Consumers Credit Union.
For more information, contact Consumers Credit Union at 877-ASK-CCCU.