Opening a financial account is a critical step in taking control of your finances. The question is, where should you open that account?
Most people can answer that question easily enough; they open their accounts with a bank. But, banks aren’t the only place for these accounts. Instead, you can open an account with a credit union.
If you’re new to this distinction, you may wonder about the differences between banks vs. credit unions. If so, you’ve come to the right place! We’ll explore the primary differences between them in the guide below.
Who Owns Banks vs. Credit Unions?
One difference between banks and credit unions is their ownership. If you ask, “What is a bank?” you’ll likely receive the following answer.
Investors own banks and run them as for-profit institutions. So, banks must make a profit for their investor owners.
Since banks need to make a profit, they allow anybody to open an account. Individuals and businesses alike can store their money here. However, bank customers have no say in how a bank operates.
In contrast, credit unions are not-for-profit organizations. Instead of investors, these organizations are owned and run by their customers. Credit unions refer to their customers as members.
The difference in how these institutions run affects how they serve their customers. We’ll discuss this further in the next section.
If you ask a credit union member, “What is a credit union?” they may respond that it’s like a bank but with better interest. Credit unions generally offer the lowest interest rates on loans, including car loans and mortgages.
They also have much higher interest rates for savings products. For example, a savings account with a credit union accumulates greater interest than its equivalent at most national banks.
How to Join a Credit Union
This couldn’t be a complete credit union guide without mentioning that credit unions don’t let anyone join. Instead, most credit unions qualify members based on their affiliation with other organizations.
For example, the State Employees’ Credit Union allows people to join who are employed by the state. One instance of such employment is teachers.
As such, credit unions are more exclusive than banks. This fact could make them less effective for your needs.
Advantages of Banks
Banks offer some advantages that most credit unions don’t. For example, they usually have more ATMs and more user-friendly apps. These conveniences stem from more banks than credit unions existing in the US.
Banks also have more investment products and features for personal and commercial accounts. For example, a bank more readily provides business credit cards or business loans.
Several bank tips offer ways to take advantage of these products. Use a source like Paradigm Life to learn the best ways to take advantage of this.
Find the Best Institution for Your Finances
Choosing between banks vs. credit unions depends on your financial goals. Do you have a way to qualify as a credit union member? If so, can you benefit more from their packages?
If not, you’d likely be better off sticking with a bank. Use a bank guide to find the best products for your financial needs!
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