Credit unions are non-profit financial institutions that tend to be local to a community. Unlike banks - credit unions are controlled by their customers. Like a bank, credit unions use the money deposited by their customers to issue business and personal loans. Because customers of a credit unions typically live in the same area or belong to the same union; the loans tend to benefit the community whether it’s a local business or a member of the community looking to remodel their house.
Many people prefer credit unions over a traditional bank because of their lower interest rates and better customer service. Many clients also like the idea of investing in their community.
The downside of a credit union is that they are not convenient for everyone. There is usually only one or two branches of the credit union so customers may have to go out of their way to get money from an ATM or deposit their checks. Credit unions understand this dilemma and more and more credit unions are opting to reimburse their clients for ATM fees incurred by using other ATM machines. Other credit unions have introduced mobile banking where their customers can take a picture of their check and deposit their check online.
Finally, a myth of credit unions is that they are not as safe as banks when it comes to insuring their savings. This is not true. Like banks, the Federal Government insures up to $250,000 per savings account.
Where credit unions are non-profit financial institutions, traditional banks are for-profit institutions whose main goal is to make money. They do this through their high interest rates and their strict eligibility for personal and business loans.
Where they lack in interest rates – they make up in convenience. While there are smaller family-owned banks – banks typically have multiple branches that their customers can use throughout the state or country. Bank of America has over 4,000 financial centers and 400,000 ATMs in the United States alone. This makes travel immensely easier especially if someone is in need of cash because they lost their wallet or under-estimated their budget.
Traditional Banks are statistically more technology savvy than a credit union – offering state-of-the-art user interfaces on their websites and different online resources such as mobile banking.
What which is better a credit union or a traditional bank? It’s really up to you and what you’d like to get out of your financial institution. If you want an establishment with excellent customer service and low interest rates for loans – a credit union may be the way to go. That is – as long as you don’t mind going to one location to deposit your checks or withdraw cash.
On the other hand, if convenience is important to you whether that means being close to an ATM anywhere in the country or ease of remotely depositing your check you may opt for a bank instead.