Credit Unions vs. Banks: Which is Right for You?
It can be difficult to tell them apart at first glance, but banks and credit unions are very different. They may serve the same basic function, but each of them provides different benefits. Understanding the key differences between a bank and a credit
union can help you decide which financial institution is the right place to put your money.
Banks offer convenience for their customers
Banks trace their origins as far back as the Roman Empire, when Julius Caesar enacted a law allowing creditors to seize the land of debtors who failed to pay back their loans. Today’s banks are far more sophisticated financial institutions, offering a bevy of personal and commercial banking products and services. They are for-profit institutions owned by investors, for whom they must make a profit. To that end, banks will typically charge more fees than credit unions.
Banks are appealing for their vast resources. They are generally able to invest more into developing their online and mobile banking services, providing a more convenient experience for their tech-savvy customers. Physical bank branches also tend to have numerous locations, and their customers have access to a large network of ATMs.
Any individual or company can open an account with a bank, but their free checking accounts will typically require a higher minimum balance than credit unions. The Federal Deposit Insurance Corporation (FDIC) is the government agency that insures banks, protecting your deposits against loss or theft. It is important to remember that not all banks are backed by the FDIC, and there are limitations to what types of deposits the FDIC will insure.
Credit unions are committed to their members
Credit unions are a not-for-profit alternative to banks. Rather than being owned by investors, credit unions are owned by their members. They only answer to you. Because they don’t have to turn a profit for shareholders, credit unions can afford to offer their members lower interest rates on their loans and higher rates on their interest-earning accounts.
Most credit unions offer a free checking account, often with little to no required minimum balance. But there are requirements to become a member of a credit union. Their customer base is limited to what is called a “field of membership,” and the criteria for eligibility can include your place of employment, a geographic area or membership in a specific organization.
Credit unions are coveted for their member service. Customers can feel like a drop in the water at a large corporate bank, but credit unions tend to place a premium on building long-lasting relationships with their members and providing a more personalized service experience.
And while banks may have a reputation for their commitment to technology and convenience, credit unions like ORNL FCU have matched their investment. Consider that ORNL FCU members are able to manage their accounts, transfer funds, deposit checks, pay loans and bills, and make person-to-person transactions — all online. Add in the fact that they also have access to a nationwide ATM network, in addition to 28 branch locations throughout central east Tennessee, and the playing field is much more even than it may have initially appeared.
The National Credit Union Association (NCUA) is the government agency that offers protection against loss or theft for credit union members via the National Credit Union Share Insurance Fund (NCUSIF). Just as not all banks are insured by the FDIC, not all credit unions are backed by the NCUA.
Is a bank or a credit union right for you?
There is no wrong answer when it comes to choosing a financial institution. It’s a decision you have to make for yourself. The good news is that there are plenty of banks and credit unions from which to choose. You have plenty of options, and all you have to do is figure out your financial needs and determine whether a bank or credit union best fulfills those needs.
If you’d like to talk more about the benefits of working with a credit union, please contact us.