Credit Union vs. Bank: Which is Better?

Perhaps you’ve assumed that a “credit union” is another title for a bank. This is a big misconception.

There’s a fundamental difference: a credit union is a non-profit, while a bank aims to make money. It’s like a Goodwill store versus a consignment shop; one is there to provide a service, and the other is there to provide someone’s income.

A credit union exists to serve the finances of a specific group of consumers. (Whoever you are, there’s probably a credit union for you.) They charge interest like banks, but credit unions use the profits to keep their rates low, and reduce fees for their members.

By contrast, banks are always looking for new ways to make a buck. This means fees for all sorts of transactions and services, and a bottom line focused on profit.

So which institution should you bank with? Credit unions are better, for most services.

Credit unions are run by their customers. It’s true: members elect a board of directors to oversee their money. When you open an account, you own part of the credit union.

Lower rates for loans, higher rates for savings. Credit union rates are better for virtually everything: credit cards, business loans, personal loans, savings accounts, CDs… you name it.

Good customer service. We’re all familiar with cold, imposing institutions. Transactions and loan applications at a bank can be as chilly. Credit unions’ bottom line is service, and most members agree that their employees are generally easier to work with.

Are credit unions secure? It is true that credit unions are not regulated by the FDIC. Instead they have their own regulatory authority, the National Credit Union Administration (NCUA). The NCUA must be doing something right— notice how few credit unions went under during the 2008 financial crash.

There are some advantages for banks:

Many banks are national or international, and thus you can bank in more places. Smaller credit unions many not offer all the services you would need (sometimes not even credit cards). ATM machines for credit unions (through Cashpoints) may be hard to find.

But if you need a solid place to keep and invest your money, credit unions do the job.

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