The majority of us will have to do business in some kind of financial institution at some point in our lives, whether it is a bank or credit union. As you might already know, we are a credit union, but what does that mean? And what is the difference between a bank and a credit union?
Traditionally, the main difference between a bank and a credit union is that banks are institutions that are for-profit. Meaning their main goal is to profit as much as they can for shareholders and the corporation as a whole. Credit unions are not-for-profits which mean that while they do need to make money to pay their expenses, that is where the need for profit ends, thus passing along the savings to their members.
One of the biggest pros for opening an account at a credit union is the lower fees, better interest rates, and more personal service. In comparison to big banks, many credit unions can reward their members with higher interest rate returns and lower fees. This also usually comes with better customer service.
Pros and Cons of Credit Unions
Credit unions are owned by the members, which is why they often have better member service. Each member acts almost like an investor, which is a fundamental difference between credit unions and banks. Banks, on the other hand, have shareholders who may or may not be members of the actual institution themselves. The criteria for becoming a member of a credit union are different for each credit union but are normally more restrictive than a bank. Things like joining a community group, having a family member or spouse connect you to their credit union, or even checking on the options for your geographical location are ways to be granted membership. They also value membership and take this into consideration when approving members for financing, lines of credit, and loans.
Pros and Cons of Banks
Banks can sometimes be more convenient, depending on the one you choose. However, they sometimes have many fees for basic programs, fees that are often higher than credit unions. They too offer loans, lines of credit, and financing options. Depending on the size of the bank they may have more programs and products for their customers to choose, but approvals are based strictly on financial and credit history.
Deciding on a financial institution is an important part of personal finances. Choosing the correct financial institution can make things like borrowing money, investing and much more easier and successful. To learn about what our credit union has to offer compared to other institutions talk to one of our Member Advisors by calling us at 800-835-3400. We are here to help you on your financial journey.