Take it to the Bank, or Go Credit Union?

You probably put more thought into choosing where to have dinner than deciding which financial institution to use. If you’re like most people, you made the choice a long time ago, and it’s working out for you. You may use the big bank near your home with ATMs across the country. Or maybe it’s the friendly community bank with a few convenient branches. Or, if you have access, possibly through where you work, perhaps it’s a credit union.  

Well, there may be greener pastures for your greenbacks, or greater conveniences and better offerings someplace else.

Banks and credit unions offer basically the same products and services—checking and savings accounts, personal loans, credit and debit cards. The differences between the two (or three, if you throw in online banks) lie in the interest rates, fee structures, and both the volume and variety of products offered.

Interest Rates

Because credit unions are member-owned, not-for-profit institutions, you may receive higher interest rates on deposit accounts. A credit card or home or personal loan typically carries a lower interest rate than one from a for-profit bank. However, with so many online banks now competing for your business, some may beat traditional bank or credit union rates.

Fee Structures

Chances are you’ve discovered “free checking” isn’t necessarily free. Overdraft fees. Monthly maintenance fees. Minimum balance fees. And the dreaded ATM fees all add up.  All these can ding you at an average $97.80 per year. It’s no secret, fees are a huge revenue generator for banks. Credit unions don’t have the same profit motive, so fees are generally lower. In fact, 76 percent of credit unions have no minimum balance requirement, according to the 2016 Bankrate Credit Union Checking Survey.

Convenience

In terms of physical presence and number of locations, it’s hard to beat a national bank. There is seemingly an ATM on every corner. And if you need to deposit that garage sale cash or the kids want to turn their coins into bills, it’s nice to have a branch close by. The local community bank or credit union can do these for you too, of course, but there are advantages in numbers. However, the credit union’s traditional weakness of not being accessible isn’t the issue it once was due to expanded Co-Op networks of shared ATMs and branches.

Technology 

Most financial institutions now offer online banking and bill pay. However, the more sophisticated your technical needs, particularly with mobile banking, the more the big banks win out. Historically, big banks have the resources to break new ground with functionality while credit unions and community banks play catch up.

Perks

While a credit union can often give you a lower APR on a credit card, don’t expect a generous airline miles program. If you tend to pay off your balance every month, the rewards programs from a big bank may be the deal for you. If you continually carry a balance, you will probably want a card offering the lowest rate possible – miles or no miles.

Offerings

There is also no real competition when it comes to the sheer number of products and services offered by banks compared to credit unions. A large bank might offer five or more different checking account or auto loan options, each with different rates and free structures. Not to mention, big banks have the resources to manage all your investments, too. Credit unions intentionally have smaller, simpler product lines in order to keep operating costs low.

Access 

Not everyone can join a credit union. Traditionally, membership requires you to belong to a particular group, community or large employer. On the other hand, a big national bank is open to anyone providing you can meet the initial deposit requirement to open an account, which is usually larger than a credit union’s.

Safety 

Both types of institutions carry the same level of deposit insurance coverage: $250,000. The Federal Deposit Insurance Corporation (FDIC) covers banks; the National Credit Union Administration (NCUA) covers credit unions.

Both banks and credit unions offer benefits and drawbacks. Take the time to examine your needs and priorities. Only then can you make the smartest choice for you and your money. Is a switch from one to the other in your future? Something to think about since it’s definitely a bigger decision than making reservations for steak or sushi.

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