Credit Unions: Are They Better Than a Bank?
Credit unions and banks are two completely different entities that some people think are the same thing. Credit unions are actually a non-for-profit organization that works to serve their members only instead of trying to turn a profit. Banks, on the other hand, are interested in their bottom line. Both credit unions and banks make loans and accept deposits. However, a credit union is a member-owned institution and their focus is to providing a safe way for members to save their money and, when necessary — borrow with reasonable rates. When credit unions have a surplus income, they return it back to their members as a dividend, unlike banks who keep it for themselves. While there are many benefits that credit unions have over banks, you may still be unsure as to which one is best for your needs. Knowing the difference between the two can help you determine the right course of action for your financial needs.
Customer Service and Favorable Rates
Unlike banks which are operated by CEOs who only want to line their pockets with more money, the members and account holders operate the credit union. This means that they — the members and account holds — have say on how the credit union is ran. Therefore, it is no surprise that credit unions typically have lower rates than banks. Furthermore, the interest rates returned are usually higher than banks or other for-profit businesses. Like banks, most credit unions have online accesses and electronic credit union statements that allow its members to keep track of their account with their personal computer.
Membership
Every credit union decides whom they will serve, and potential members typically have to be a part of certain field to gain access. This is usually based on the community, employment or organization you are a member of. Credit unions typically serve members with modest means and don’t go after the “big fish” with large amounts of money like banks do. Some credit unions serve low-income members and provide them with financial services with reasonable rates.
Protection and Coverage
Credit unions that are federally insured are regulated by NCUA, National Credit Union Administrations, and are backed by the United States government. This lets its members rest easy knowing their money is just as safe with a credit union as it is with a bank. In fact, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 made the share insurance coverage increase to $250,000 for all federally insured credit union accounts.
Category: Banking, Family Finances
