Banks and Credit Unions: What You Should Know

When you are looking to deposit money, there are two major options: banks and credit unions. While banks and credit unions have much in common in terms of the services, there are also major differences between them that you should know about.

Ownership and Profit: Credit Unions vs. Banks

Credit unions function much like banks in terms of services and products they offer, but there is a major difference. Banks are privately owned and are run for profit, like any other business. Most banks are national or even international chains, and their owners seek to turn as large a profit as possible from their customers. This is not necessarily a bad thing; it just means that you will probably pay larger fees at a bank than you would at a credit union. Credit unions, by contrast, are cooperatively owned and are not-for-profit. Cooperative ownership means that the people who have accounts at the credit union also have a share in the ownership. Credit union customers elect a board of directors periodically from their peers. Not-for-profit status means that credit unions do look to turn a profit, but only enough to cover their business needs. This means that fees for services and products at credit unions are usually lower than they are at banks. 

Services

Credit unions and banks offer generally offer most, if not all, of the same basic services. For example, most credit unions offer savings accounts, checking accounts, credit cards and even online banking. Where credit unions and banks differ in terms of what they offer is usually found in the realm of lending. Credit unions get funds for the loans they offer through their members' savings accounts and from selling shares to their members. This means that credit unions, especially smaller ones, have more limited funds to lend from than large banks do. 

Comparative Benefits

Many credit union customers value the community-based orientation of credit unions. There is a certain level of comfort and confidence that comes from having a say in who is in charge of your finances and in having partial ownership of your financial institution. On the other hand, banks tend to be able to offer a wider range of services and do more lending. Whether you put your money in a credit union or a bank, or spread it across both kinds of institution, will depend ultimately on where you feel your money will be most secure and what types of services your local credit union offers in comparison to a large bank.

 

 


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