Credit Union vs. Bank: Which Is Better for Your Situation?

Where you keep your money is an incredibly important decision that many people don’t give much thought to. A majority of people opened a bank account at the same place that their parents did when they got their first job and didn’t think twice about it. But that’s not always the best option for their situation. There are pros and cons when it comes to opening an account at a credit union or a bank. You should compare the ones in your area and decide if you’re keeping your money in the best location for your situation.

Credit Union

Pros

Not-for-Profit

Credit unions operate differently than banks because they are a not-for-profit institution. While large banks are focused on making a profit, often through fees and at the expense of their customer base, credit unions operate with their customer base and community in mind. This means, they’re more likely to be willing to work with you on personalized service and more forgiving if you fall on hard times.

Higher Interest on Deposits

Traditional savings and checking accounts at large banks have low interest rates, at best. While this works for some people, it’s not the best option for financially savvy people. Having a higher interest rate on your savings account means that your money will make money without you having to do anything about it.

Focus on Community

Because they are local, credit unions are, by nature, involved in the community around them. National banks tend to focus on themselves at a national level instead of each individual branch location. Local credit unions are owned by their members and often give back to their community through monetary donations and volunteer work.

Cons

Smaller Network

Credit unions are a more localized institution compared to banks, so there are fewer locations for you to visit or ATMs to draw from. This means that it’s harder to handle banking issues while you’re out of town, which isn’t a problem for those with national banking networks. More recently, however, credit unions have been joining nationwide networks with other credit unions to expand their reach and mitigate this problem. Check with your local credit union to see what their reach is like.

Stricter Requirements

While banks will let pretty much anyone open an account, credit unions are a bit stricter when it comes to who they do business with. This can include occupational or residential requirements to do business with them. Check with your local credit union to see if you even qualify to open an account with them.

Bank

Pros

Large Network

Most banks are a part of a national chain which means you’ll never be too far from a branch location or ATM. If you’re a frequent traveler or have to move often, a bank is going to suit your needs better than a localized credit union will.

Technologically Savvy

Banks tend to think more technologically than credit unions do. They’re quicker to roll out new updates for their app and tend to lean into adapting new tools rather than doing things “the old way.”

Reputation

Most banks have been around for a long time and have served a large number of people over the years. This means that they have a solid reputation, good or bad, that you can review before committing to banking with them. If your local credit union has been around for a while, they most likely have a reputation as well, but not all of them do. With a bank, you’ll know what you’re getting.

Cons

Higher Interest Rates on Loans

Banks tend to offer loans with higher interest rates compared to those offered by credit unions. This is due to the fact that banks are for-profit institutions and want to make money over anything else. This doesn’t mean that the loans are predatory, but they aren’t as advantageous to you as other loans may be.

Higher Fees

Since banks are for-profit financial institutions, they tend to charge higher fees more often than credit unions. These fees include overdraft fees, minimum balances fees, and other account maintenance fees that will be outlined in your original paperwork. Many banks offer ways to waive the fees, so pay attention to what your bank is offering.

Whether you’re looking to open a new account or applying for a new loan, the place you choose needs to be right for you. There’s not a one-size-fits-all solution. There’s only what meets your needs and what is offered by the various banks and credit unions in your area. Do your research to give your finances the best support they can have.