CREDIT UNION VS BANK

CREDIT UNION VS BANK

When driving on the road, I often see the signboard of xxx Credit Union. Have you ever wondered, what is Credit Union? How is it different from a normal bank? I have always been curious, but I haven’t been able to find out the answer until now.

The main business of the two is the same, bank accounts, credit cards, loans, but after careful exploration, there are four major differences:

  1. Ownership: Banks are corporations owned by shareholders; credit unions are owned by their customers (meaning You and I have the right to vote). Furthermore, while board members of banks are typically paid for their service, people on a credit union’s board volunteer their time.
  2. Profits: Banks are for-profits so they charge you a lot of fees just to open, maintain an account; however, they distribute the profits to shareholders (if you own their stocks) via dividends and share buybacks; credit unions are nonprofits so they use the profit to increase interest rates on saving accounts and decrease the interest rates on loans.
  3. Size and Reach: Credit Unions are much smaller in size and coverage geographically which means you get more personal attention and help.
  4. Regulation: Banks are regulated by an alphabet soup of federal and state agencies such as the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and state banking regulators. Credit unions, by contrast, are regulated by the National Credit Union Administration on the federal level, and state agencies on the state level. Beyond simply regulating them, moreover, the NCUA is tasked with operating and managing the National Credit Union Share Insurance Fund, which, playing an analogous role to the FDIC vis -à-vis banks, insures the deposits of more than 98 million account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions.

The next question you have to ask is, which is better?

Both are very good, mainly depends on your needs and decides which one is more suitable for you.

If you are a big business and need to extend your credit line to borrow in addition to bank account deposits, large banks are the first choice.

If you are a small business or an ordinary person, and your needs are simple, that is, deposits, car loans, and housing loans, the Credit Union will be a better choice.

  • They are the best choice for small loans as larger banks are less interested in loans under $100,000.
  • Higher deposit rates (no minimum deposit required) and lower loan rates (NASA Federal Credit Union even offers 100% Mortgage financing)
  • Most credit cards have no annual fee (Pentagon Federal Credit Union’s credit cards don’t even have foreign transaction fees) and have low recurring interest rates (but there may be fewer rewards, for example, some may not have Cashback or Points for gift cards).
  • If you have kids in college, most Credit Unions, in partnership with Credit Union Student Choice, offer a Private line of credit to supplement college education costs – Zero fees, Lower interest rates, Flexible repayment plans including school deferment.
  • Many Credit Unions are affiliated with Surcharge-Free ATM Networks and/or the Shared Branch Network offering members nearly 30,000 free ATMs or over 5,300 shared locations to match any big bank.

So how do you choose the Credit Union that suits you?

“Not everybody can join any credit union, but just about everybody can join a credit union”

Since each Credit Union’s Target clients/members are different, you can’t just walk into a Credit Union to open an account, but must meet the application requirements of their respective Credit Unions, such as employee groups, associations, religious or fraternal affiliations, and residential areas.

  1. Choose a convenient institution: Look for a credit union that provides ATM services or a branch network that is local to your area or belongs to Free ATM Networks. Also, make sure that the institution you choose has reliable online banking — and even mobile banking services.
  2. Look for great programs: Make sure that your credit union offers home lending services, issues credit and debit cards provides auto loans, features a good savings program, and offers financial counseling.
  3. Find a credit union that fits your needs: Credit union members have more success at institutions that cater specifically to their lifestyle needs. “Military members are likely to get better service from a military credit union because the credit union understands that lifestyle and caters to those members’ financial needs. The same holds for some profession-focused credit unions like municipal employees, realtors, or large company retirees. If you discover that a credit union doesn’t offer a certain service, ask for it. After all, if you join, you’re an owner. If enough others make a similar request, you may very well get what you want.
  4. Shop around for the best fees: It always pays to shop around, especially if you have more than one credit union you might join. If you want to find a great credit union in your area, visit FindACreditUnion.com or ASmarterChoice.org for more information. With the WalletHub credit union locator, enter your location, employer, church, school, and volunteer information to see what credit unions you’re eligible to join.

Credit unions have become the organic financial institutions in our financial service marketplace right now. They’re locally grown, locally owned, and are the best options for people on a local basis.

Learn more about Credit Unions — get consumer tips and consumer protection information all in one place. MyCreditUnion.gov is brought to you by the Office of Consumer Protection, the National Credit Union Administration’s office dedicated to protecting the rights of consumers, resolving member complaints, and promoting financial literacy.

By aamritri

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