Which is Better for You – a Bank or a Credit Union?
Weighing the pros and cons of banks and credit unions can help you decide which is better for you. Here are some key considerations.
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What is a bank?
A bank is a financial institution that accepts deposits and channels those deposits into lending activities, either directly by loaning or indirectly through capital markets. A bank links customers that have capital deficits to customers with capital surpluses.
Banks traditionally loan money at interest, and act as intermediaries in financial transactions. They provide other services such as storing monetary value (i.e. making loans) and facilitating exchange. Banks also provide services such as investment management and insurance. Some banks are involved in venture capitalism and other forms of corporate finance, including providing loans to small businesses and issuing corporate bonds.
What is a credit union?
A credit union is a member-owned and -operated financial institution, created for the purpose of serving its members. Credit unions provide most of the same services as banks, but they are structured differently. Credit unions are not-for-profit organizations, owned by their members and run by a board of directors (elected by the membership). Any surplus generated is returned to the members in the form of higher dividends on savings, lower loan rates, and free or low-cost services. In contrast, banks are for-profit institutions, owned by stockholders and run by a board of directors responsible to them. Any surplus generated is paid out to the stockholders in the form of dividends.
How do they differ?
Banks and credit unions are both financial institutions that offer similar products and services, but there are some key differences between the two.
Banks are for-profit businesses that are owned by shareholders. They may be publicly traded on the stock market, which means that anyone can buy shares of the bank and become a partial owner. Credit unions, on the other hand, are not-for-profit cooperatives that are owned by their members. When you open an account at a credit union, you become a member and partial owner of the credit union.
Because they are for-profit businesses, banks typically have higher fees and rates than credit unions. They also tend to be less flexible when it comes to things like loan terms and paymentdue dates. However, banks often have more branches and ATMs than credit unions, so they may be more convenient for customers who need to access their accounts frequently.
Credit unions typically offer better rates than banks on products like loans and savings accounts. They also tend to be more lenient when it comes to things like late payments or overdrafts. However, credit unions usually have fewer branches and ATMs than banks, so they may not be as convenient for customers who need to access their accounts frequently.
Which one is better for you?
It really depends on your financial needs and goals. If you’re looking for the lowest fees and the best interest rates, a credit union is likely your best bet. But if you need full-service banking with nationwide ATM access, then a bank is probably a better choice.
Here’s a closer look at some key factors to help you decide:
– more likely to offer free checking accounts and other features such as online and mobile banking
– branches and ATMs are usually more conveniently located
– typically have longer hours than credit unions
– offers a wide range of financial products, such as loans, investments, and insurance
– often have higher interest rates on savings accounts and lower fees than banks
– may offer special benefits to members, such as discounts on loans or exclusive checking account features
– typically have shorter hours than banks