Bank? Credit union?
Are they just different names for the same thing? What exactly is the difference between a bank and a credit union, and how do you know which type of financial institution will be more beneficial to you? Which should you trust with your finances?
Moran Law breaks down the advantages and disadvantages of both so you’ll be able to make an informed decision.
Credit unions are member owned financial cooperatives. This means that all the members banking with the credit union are its owners. Credit unions are not for profit organizations offering many of the same services as a mainstream banking institution. They are not in business to turn a profit, but to serve their members.
What are advantages of a bank over a credit union?
Credit unions offer better customer service than banks do. There are also a host of financial benefits to banking with a credit union rather than a traditional banking institution.
Credit unions offer lower interest rates on mortgages and credit cards in order to be competitive. They’re also less likely to tack on excess fees for different loan products.
If that’s the case, why would anyone choose a traditional bank?
Traditional banks have certain advantages over credit unions. They often have more resources and can provide service more quickly. If, for example, you need to transfer money or forgot to pay your credit card bill in advance, you can arrange for the transaction online and it happens very quickly. They also have many branches, locations and ATM machines throughout the country, making them more convenient to use.
Which type of financial institution should I choose?
You should choose between a credit union and a traditional bank based on your personal financial situation.
If you are secure in your finances, a credit union is an excellent option. Banking with a credit union will help you grow your finances with their higher interest rates on savings, and lower interest rates on mortgages and credit cards.
If you live paycheck to paycheck, you might need the stability of a traditional banking institution. Banking with a traditional bank would allow you to, for example, transfer money quickly if you needed to pay a bill and didn’t have enough in your checking account.