There are a lot of questions surrounding if credit unions are better than banks. One of the problems with answering this question is that most of those asking don’t understand the difference between the two.
Credit unions have become more accessible and have a broader reach than they did in previous years, making them a viable option for spenders, savers, and borrowers. Here’s what you need to know about credit unions, and how they stack up against a bank.
What is a Credit Union?
A credit union is a non-profit organization, whereas a bank is for-profit. The benefit of the non-profit approach is that members can benefit from higher interest rates on their savings, as less money goes toward the business. Credit unions are very member-focused, and those who go there tend to feel as though they are treated more like a human than a walking wallet.
One of the differences with credit unions over banks is that to be a member there are certain requirements you must meet. This is different from being able to walk into a bank anywhere and open an account. The requirements of a credit union vary from institution to institution. They could require something as simple as a home address in the local area or be targeted toward workers in a certain industry. For example, Dane County Credit Union is a credit union in Madison, Wisconsin that services people in the surrounding areas, regardless of their job types. Industry-focused credit unions might be open only to teachers or family members of those who work for a corporation-owned credit union.
Where Credit Unions Beat Banks
A lot of people dislike using a bank because they feel as though they have to pay to access their money. They are also well aware of how profits work and are more mindful of the corruption in parts of the banking industry since the recession in 2008. For those people, it’s the idea that they are a member of an institution that has their best interests at heart that makes all the difference in a credit union.
There are financial benefits to being a part of a credit union as well. Credit unions don’t have the same shareholder obligations of big banks. As a result, interest rates are higher on savings accounts and lower on loans. Withdrawal and check fees may also be lower, depending on the institution.
Credit unions are often more flexible with their pre-requisites as well, as their customer-oriented approach is built to help you achieve your financial goals without any hidden agendas. The agreements and terms are often simple and straightforward, with no nasty surprises down the road.
Where Credit Unions Fall Short
The positives of using a credit union often far outweigh the negatives. There are, however, a few areas in which credit unions don’t have the same reach as banks. There are often fewer options for account types, which some will see as a negative. On the other hand, some clients will view this as a positive as they won’t get overwhelmed by choices.
Credit unions are notorious for their limited locations and ATMs, as well as their lackluster online services due to a smaller budget than big banks. This isn’t the case for all credit unions, especially as web programming becomes more accessible. It is, however, a consideration for those who travel frequently and require the convenience of banking on the go.
Are Credit Unions Better?
In many ways, the credit union experience is superior to using a bank. However, it all comes down to personal needs. If you travel a lot for work or numerous ATMs and streamlined online banking is a priority for you, you may opt for a bank over a credit union. Still, it’s worth seeing what your local credit union has to offer – they may be better suited for you than you would have thought.
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