When thinking about where to keep your money, a bank probably springs to mind. But it’s definitely worth weighing the value of a credit union vs. bank before making any decisions. A bank is not your only option — and it may not always be your best option. Credit unions are smaller and they offer some unique advantages. In this article, we’ll go over what credit unions are and how to know whether one is a good fit for you.
What is a credit union?
A credit union is similar to a bank in many ways. However, credit unions are smaller, non-profit institutions. Banks tend to be larger and for-profit.
Just like banks, credit unions offer deposit accounts, like checking and savings accounts, as well as loans, and sometimes credit cards. However, some of the terms they use to describe their offerings are different. For example, what banks call certificates of deposit (CDs), credit unions often call share certificates. But other than the name, they’re essentially the same thing.
Why credit unions:
- Emphasis on customer service
- Higher APYs on savings products
- Lower interest rates on loans
- Deposits insured by the National Credit Union Administration (NCUA)
How do credit unions and banks differ?
The key difference between a credit union vs. bank is that credit unions are nonprofits while banks are for-profit institutions. As a result, credit unions can offer lower loan rates and higher savings rates. However, credit unions tend to be smaller than national banks.
That means credit unions generally have fewer branches, fewer financial products, and limited ATM access. Also, online and mobile account management tools usually aren’t as advanced with a credit union vs. bank.
Rates at banks may not be as attractive, but most banks have a large number of branches, a wide variety in financial products, and easy ATM access. Many banks also have highly-rated apps and websites for online account management.
Credit unions are usually designed to serve the financial needs of a particular community. That might be residents of a specific region, members of a certain faith, employees of a certain organization, or other groups. They usually have eligibility requirements, but they aren’t difficult to achieve. Banks, on the other hand, serve just about anyone.
No matter which side you take in the credit union vs. bank debate, your money is protected up to $250,000 per person per account. Bank accounts are backed by the Federal Deposit Insurance Corporation (FDIC) while credit union accounts are backed by the NCUA.
Pros and cons: Credit union vs. banks
Here’s a closer look at some of the pros and cons of a credit union vs. bank so you can decide which is right for you.
View more information: https://www.fool.com/the-ascent/banks/credit-union-vs-bank/