What is the Difference Between a Bank and a Credit Union: Pros and Cons of Banks vs Credit Unions
Putting your Money to Work for You
When money is abundant consumers tend to be more driven by convenience than by saving a dollar. In times of abundance we are likely to pay less attention to ATM charges and small, hidden fees charged by the bank, because what is important is the availability of our money.
The multiple branches of banks spread out all over the country make doing business at a bank very convenient. But, how should a person choose a bank vs. a credit union when money is tight? What about when you’re not working as many hours and the money is not flowing as abundantly? Those bank fees certainly become more noticeable, don’t they?
In downward economic times such as these, the focus of the consumer tends to shift away from convenience and back onto saving that dollar - and as many others as possible. This is when people start taking note of hard-earned money that disappears when they were otherwise too busy to pay attention. This may be the right time for you to look into a credit union.
The Pros: The Difference between a Credit Union and a Bank
Many people may not know the difference between a bank and a credit union. It mainly boils down to ownership. The banks are owned by investors with the purpose of earning money for those investors. Credit unions are owned by the members with the purpose of benefiting YOU the member!
The bank is in business to make money. They charge maintenance fees and penalties to members which turn into profits for their investors. Credit unions charge less penalties and lower fees. There is no profit to create, only the interest of its members to protect. Since the credit union is a non-profit institution it is exempt from paying federal income tax. This adds up to more money that goes back to its members in the form of savings.
In addition to taking less money from members, credit unions help save money for the members by providing higher interest rates on accounts and offering lower interest rates for loans.
The Cons: When the Credit Union Might Not Be the Best Option
Even with all of the attention given to the credit unions and the benefits to their members, they are not a one-stop shop to satisfy all of one’s banking needs or requirements.
As mentioned at the beginning of this article, banks make it very convenient to access their services. It may be likely to find a branch of your bank in any state you visit. The credit union will offer access to money through the ATM and some credit unions even reimburse for fees paid at other bank’s machines. Even so, it is not as convenient as being able to walk into the local bank to take care of banking issues. You will only be able to visit your credit union’s one location in your neighborhood making it inconvenient for some. Also, you must become a member of a credit union and meet the terms of that credit union’s membership.
You may also find that the bank has more loan options than the credit union has to offer. Even though the credit unions charge lower interest rates on loans, it has fewer types of loans available. For that reason it would be wise to shop both institutions to see who can give you the best product for your specific needs.
All things considered, it may be wise to keep a little money in both the bank and the credit union and use them according to your spending needs. In the past, doing business through a bank account and using the credit union account for savings was common. But, as more and more consumers pay attention to the hidden fees, the way they are treated and how their money is managed, credit unions are being used as the main account, while extra money is kept for specific purposes in the bank account. Whichever suits your needs, it would be worth your while to investigate both and to make sure your hard-earned money is as protected and put to the best use as it can be.
