Banks and credit unions are a necessity for modern life. Although the merits of traditional banks and credit unions vary between organizations, they offer similar financial services and checking and savings accounts.
Credit unions and banks are structured differently, resulting in different benefits for customers. Banks are for-profit institutions, while credit unions are nonprofits that can invest their earnings back into services and interest for the members.
There are other minor differences between the two that may impact your experience. In many cases, credit unions offer better savings accounts and customer service, with their other features being just as good as large banks. Although big banks sometimes offer slightly better rates on loans, they typically recoup that money by charging higher fees.
Both credit unions and banks offer similar checking accounts that use both checks and debit cards to complete transactions. Many financial institutions also allow you to send money electronically through your checking account, both for paying bills and for sending money to friends and family.
Banks often charge higher fees than credit unions. Fees can vary between institutions, but some have free checking. Many will also waive fees if you maintain a certain amount of money in the account or have a direct deposit set up.
Checking accounts are insured for up to $250,000. Banks’ accounts are insured through the Federal Deposit Insurance Corporation (FDIC), while credit unions’ are insured through the National Credit Union Administration (NCUA).
Some credit unions offer interest checking, which allows customers to accrue interest on checking accounts. This offers more convenience than savings accounts by avoiding the withdrawal restrictions on savings accounts.
Both banks and credit unions usually have restrictions on how much customers can withdraw from savings accounts. Although the Federal Reserve Board recently lifted their own limits on monthly withdrawals from savings accounts, individual banks or credit unions may still have them in place.
Credit unions often have higher savings account interest rates than traditional banks. Bank interest rates are typically around 1% APR, while credit unions offer up to 4%. This is due to credit unions’ not-for-profit structure that prioritizes the customers’ needs, instead of shareholders’ profits.
The rules and eligibility for savings accounts can also vary, but it’s common for banks to require a minimum investment. Like checking accounts, savings accounts are insured at both banks and credit unions. This insurance includes interest and dividends that the account accumulates over time.
Mortgages and Loans
Banks and credit unions both offer mortgages and loans, including loans for cars, small business, and personal use. The minimum and maximum amounts, eligibility requirements, and interest rates vary between institutions.
Credit unions often have a variety of student loan and loan refinancing options available. Since they’re not for profit, they may have better loan terms and interest rates than other providers.
Although some banks advertise lower interest rates, they sometimes also have hidden fees or have stricter eligibility requirements. Local credit unions may also be able to provide faster service and processing.
Services and Perks
Although national banks usually have a wider range of credit card options available, most of them aren’t that different from one another. Credit unions’ cards still have low interest rates, great rewards, and features like balance transfers and automatic payments.
Larger credit unions may sell stocks or rent safe deposit boxes. They may also have members-only access to special discounts at other businesses, or provide financial coaching to members.
The majority of credit unions have more than enough services for working professionals and families.
ATM and Branch Access
Big banks usually have their own ATMs available in a variety of locations like malls and gas stations. They usually allow their members to withdraw money for free, and customers from other banks to withdraw money for a small fee. However, bank chains sometimes only have a few ATMs or branches per city.
Credit unions often partner with a bank or a network of credit unions to provide free transactions at as many branches and ATMs as possible. Sometimes, credit unions also reimburse a certain amount of ATM fees per month, making their ATM access and cost comparable to those of big banks.
Large banks with many customers often rely on online FAQs and email or chat-based customer service to provide help and answer questions. They may incorporate a number of options into their customer service call menus or may have to connect you to multiple different departments when trying to answer questions via phone.
Credit unions often have quicker and easier customer service. They offer email-based options for people who need it, but also make it easy for customers to call and talk to a live person. Very small credit unions sometimes only have customer service during regular business hours, but larger ones provide 24/7 customer service just like the big banks.
Technology and Online Banking
In the past, banks have been able to introduce new online banking technologies faster than credit unions. However, credit unions have largely caught up with banks, and now offer a full range of online account management options and mobile apps.
Credit unions and banks often offer online mortgage and loan applications, plus mobile check deposit and electronic statements. The combination of excellent online features and personalized customer service make credit unions a winning choice for consumers.
Finding the Best Credit Union for Your Money
Although banks sometimes have good financial services and loan rates, credit unions have become a priceless asset to communities around the United States. Credit unions almost always offer superior customer service, savings account rates, and other amenities.
T&I Credit Union has built an institution that provides the same services as big banks, but with personalized customer service. We are based in Michigan, but share branch locations with a network of credit unions around the country to give you easier access to your money.
We offer 24/7 customer service to help you with any questions or concerns that arise as you plan for your future. Contact us at 1 (800)-338-3908 to learn more about what we can do for you.