Credit unions and banks provide almost identical services, including savings accounts, checking accounts, certificate of deposits and loans. Many also offer stocks and safe-deposit boxes.
Given that the services are basically the same, is there any reason to choose one institution over the other? Yes, because those services are not always created equal.
-Credit unions are not-for-profit organizations, while banks are for-profit and in the business to make money for shareholders. A credit union’s focus is on providing savings and quality services to its members, which generally results in higher interest rates on savings accounts and lower interest rates on credit cards and loans. If you compare loans, money market accounts, certificate of deposits (CDs), and mortgages between unions and banks, their rates will win every time.
-Because credit unions, such as fhfcu.org, are non-profit organizations, if they earn more than it costs them to operate the business, the additional profits are distributed to the members as dividends.
-The average overdraft fee charged by unions is $25; banks charge an average of $39 per overdraft. There’s a similar disparity in late fees for credit cards.
-While you may get the highest rates on your savings products and lowest rates when you borrow money through a credit union, you might find that it charges higher fees for using the ATM. If you’re someone who uses the ATM regularly, the higher fees paid may cost you more than the benefits earned through higher savings rates.
-To become a member of a union, you usually have to meet certain criteria. If you don’t meet the eligibility requirements, it won’t matter how much better that credit union would be for your financial situation compared to the local bank – you won’t be allowed to open accounts at the union.
-Credit unions aren’t insured by the Federal Deposit Insurance Corporation (FDIC), although they may be insured by the National Credit Union Administration. Be sure to check before you become a member and open an account.
-As long as you’re at least 18 years old, most banks will allow you to open a savings account regardless of where you live, work, worship or attend school. Unions often require that members meet a variety of eligibility criteria to become a member, although it’s gotten easier to qualify for credit union membership in recent years. Most of the time, you’re eligible based on your employer, place of residence, or through a family member’s eligibility. Some unions allow you to join by paying a membership fee.
Money held at banks is insured by the FDIC.
– Banks have more branch offices than the typical union, which means it may be easier to do your banking unless you choose a small, local institution. Many unions have formed networks that make accessing ATMs easier, just as there are banking networks that make it possible for you to access your bank almost anywhere in the world.
-Banks are for-profit organizations, which means they create fees and higher interest rates on money they lend in order to turn a larger profit.
-Savings products receive lower interest rates than credit union savings products.
Credit Union Loans…
Are an often-overlooked source of credit for people in need of financial help Will only be given to people who are already members of the specific credit union Sometimes also require you to be saving with the credit union Can be ideal for people looking to borrow smaller sums of money Are definitely cheaper than short-term payday loans! Can only have a maximum interest rate of 26.8% APR Have repayment terms ranging between 5 and 25 years depending on the union.