Have you ever wondered if you should use a credit union instead of a bank for your financial transactions? With so many options available today it can be hard to choose which institution to use.

While banks and credit unions have a ton in common, there are a few major differences as well. It comes down to figuring out what features mean more to you than others. Some people want more personalized banking experiences while others want more online options.

Here’s what you need to know so you can make an informed decision when choosing a credit union vs. a bank in the future.

What are the differences between credit unions and banks?

Banks and credit unions offer a lot of the same products and services but have one major difference — ownership. Banks are for-profit entities and they’re often publically traded companies. Credit unions are member-owned.

Banks have investors, both big and small, that influence decisions for the bank. But if you use a credit union you are a “member” or a part owner in the company. This can be a big deal to some people and it’s often a reason that people choose credit unions over banks.

Credit unions can also be a better deal because the company is not controlled by outside investors. Instead, credit unions seek to maximize services for members. They do this in several ways:

  • Keeping loan rates low.
  • Offering free checking (and actually making it free, unlike some big banks that have tons of stipulations to actually not get charged a monthly fee).
  • Offering higher interest rates on CDs (certificates of deposit) and other savings accounts.

What products are offered?

Both credit unions and banks offer many of the same products, including:

  • Checking accounts
  • Savings accounts
  • Business accounts
  • Auto loans
  • Home loans
  • Money market accounts
  • CD’s (certificates of deposit)
  • Custom loans (construction, land and other loans)

Can anyone join a bank or credit union?

Another huge difference is that banks are for-profit companies, while credit unions are non-profit businesses. To keep their status, credit unions have to limit the number of individuals they choose to open accounts with.

Usually, these people share a “similar bond.” While this sounds strict, it often isn’t that hard to get accepted as a member of a credit union.

Some of the requirements can include things like:

  • Where you live in the United States
  • Membership in an organization ((like Navy Federal Credit Union, which requires members to be in the armed forces)
  • A family member’s eligibility
  • Attending a specific school or organization

If you are a credit union member and decide to leave, you can still be qualified in the future.

Where will I get better customer service? 

For some people, customer service is a major component of banking. But others, such as millennials, tend to avoid face-to-face encounters and prefer the convenience of doing everything online.

While both banks and credit unions offer great customer service, many online reviews report better service from credit unions.

The reason?

Because credit unions have fewer clients, known as members, they are able to get to know them better and provide more personalized services. The more you visit a branch, the more you can get to know the same faces at the credit union.

But then again, I’ve also established a great rapport with people at the Chase bank outlet that I frequent. This can be different for everyone and should be evaluated on a case by case basis. 

Is it safer to use a credit union or a bank?

You work hard to earn your money so it’s smart to ask which one is safer. Both have safeguards in place to make sure you are protected.

Bank accounts are guaranteed by FDIC insurance, which has the backing of the U.S. government. Credit unions have something similar known as NCUSIF (National Credit Union Share Insurance Fund) coverage protection.

Both offer identical protection limits. Each one guarantees a maximum deposit of $250,000. If you have more than $250,000, make sure to spread your money through several different institutions so that all your money is protected.

If you are using credit unions, check if your credit union is state or federally chartered. If it is state-chartered it might not be as safe for your money. It is worth checking with a credit union representative to make sure you are insured.

5 reasons you should choose a credit union

Here are some of the biggest reasons you should choose a credit union:

1. You’ll be a member

Unlike with a bank, you are a member of a credit union rather than a customer. The credit union’s goal is to help make money for you and other shareholders.

2. Lower rates on certain loans

Membership benefits tend to also include higher rates of return on savings accounts, and lower interest rates on other accounts. This can mean lower rates on credit cards, mortgages, home equity loans, personal loans and auto loans.

The lower the interest rate, the easier it will be to pay off your debt in the future.

3. The same services and better customer service

Both banks and credit unions offer nearly the same services on nearly all types of financial vehicles. But, many people say that credit unions offer a more personalized type of experience.

If you’re someone that might need more help with certain transactions this is a huge benefit!

4. Lower fees

Credit unions also tend to offer lower fees on simple transactions than big banks. Banks make a ton of their money on overdraft, monthly checking, and other fees that most people hate! A lot of credit unions will save you the stress of dealing with these unnecessary fees.

5. More flexibility with lending requirements

If you don’t have an excellent credit score, a solid record of unemployment or a large deposit for a down payment, banks can deny you pretty easily. This is where credit unions and personalized services can help you greatly!

With a more member-focused philosophy, credit unions tend to work better for people who might have a tough financial background. If you’re a long time member and have fallen on hard times this can also be a big factor in helping you out in the future.

While there are some great benefits to credit unions, banks also have their fair share of perks.

5 reasons you should choose a bank

1. 24/7 support

Whenever an issue comes up with your money it can be scary. You might have bank fraud, credit card fraud or a general question you can’t find the answer to online. This is a big perk of big banks, as most of them offer 24/7 customer service.

Plus, they tend to have more online tools that can help get you answers to your questions quickly. One thing I’ve always enjoyed with Chase is that I’ve been notified instantly of fraud several times and had it handled immediately. Most of the time I don’t even need to speak with a representative. I can reply via text message.

While some credit unions have weekend hours and great websites, banks have more resources to make support easy regardless of the time of day.

2. Larger network

Big banks have big money, which means more branches nationwide and maybe even internationally. This can mean it’s easier to find physical branches and avoid costly ATM fees.

Some credit unions are also part of networks, but this is not as common as with a big bank. Big banks also may have longer hours.

3. More advanced technology

Similar to the 24/7 support, banks, especially big ones like Chase or Bank of America, tend to have to better technology. I’m someone that pays for everything with an app so I really enjoy having up-to-date apps with the best technology.

Big banks have more money to spend on engineers and tend to be quicker with rolling out new features and additional security. Credit unions don’t always keep up with the latest technology, which can be frustrating. 

4. Pairs well with other apps

One of the biggest benefits of big banks is the ability to do everything online. When all your information is online it makes it effortless to sync your account information with budget and money-saving apps. My personal favorites are Mint and Personal Capital, which make it easy to help you save money and budget every month.

Not all credit union apps sync with other apps, which makes it harder to track your budget and expenses. You can still track expenses manually, but it requires more work on your end. This can lead to not tracking, which leads to overspending and missing your financial goals.

5. More credit card options

While most of the products are the same between banks and credit unions, banks have a huge advantage in the number of options. For example, most credit unions offer credit cards but have only one or two options.

But bigger banks like Chase, Bank of America or Wells Fargo offer a ton of cards suited for your needs. If you’re a frequent traveler you can get a card that rewards you with airline points. Or choose one that gets you cash back.

Plus, bigger banks tend to offer credit cards with low or 0% balance transfer rates that can help you pay off other debt or buy a big item. The point is that you get to choose instead of having limited options and settling for a card without benefits.

While there’s usually no requirement to be a member of a particular bank to get their credit card, it may help you qualify for special benefits.

Which should you choose?

Comparing credit unions to banks is tough because they have a lot of similarities. I would say that If you want ownership, then I recommend choosing a credit union.

If it doesn’t matter much to you then I recommend finding the best deals. Both banks and credit unions offer so many of the same services it really comes down to research and comparison. You need to do what is right for you! Remember, you can always have both types of accounts for different types of loans or accounts.  

To research which is the best fit for you, do a quick search and compare different loan options. Whether you are buying a house, car or need a personal loan, shop around a few places to get the best deal. The same goes for applying for new credit cards. Make sure to find rates from at least one online lender, one credit union, and one bank.

When shopping around make sure to compare the rates, fees and eligibility requirements. If you don’t have good enough credit for a certain loan, find that out before wasting time (and money) filling out an application.

Final thoughts

Hopefully, this post educates you on credit unions vs. banks. While the majority of Americans use banks, there are still millions of people who prefer the smaller, more intimate services of a credit union. It all depends on your specific financial needs at this particular time of your life.

And don’t forget, you can always use both banks and credit unions! It’s not an either-or situation where you have to choose to use one or the other for the rest of your life. Ultimately, it’s about finding out what works best for you and your family. 

Do you prefer to use a bank or credit union? Do you use both? Please let us know in the comments to help fellow readers!

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