When deciding which financial institution you will use to save your money, you may wonder if it is better to use a credit union or a bank. There is little difference between banks and credit unions regarding convenience. Most credit unions can provide the same online services you get from a bank. Many credit unions have ATMs locally and nationwide.
Credit unions and banks offer government-backed insurance for your money. That being said, there are some reasons why using a credit union instead of a bank could be right for you.
Ownership and Membership
A credit union is owned by its members. It is a not-for-profit organization. While banks are concerned about making profits for their investors, credit unions are focused on keeping their fees low and offering the best interest rates on savings accounts.
Not everyone can belong to every credit union. Credit unions must limit their customers to a “field of membership.” This may be a place of worship, a geographical area, a workplace, or a particular organization.
As a credit union member, you have a voice in determining how specific policies are carried out. This is not true for bank customers.
A credit union will typically have the lowest interest rates on loans. This means that typically if you work with a credit union, ones like Credit Union of Denver or others, as opposed to a bank, you’re going to be paying less money in interest on your mortgage, car loan, or small business loans.
Credit unions typically offer higher interest rates on saving accounts, CDs, and money market accounts. This means that you can borrow money for less, and you make more when you invest through your credit union.
Large banks are known for offering lousy customer service. For example, in 2018, a central US bank was fined $575 million because they charged customers for unnecessary auto insurance and mortgage fees. They opened unauthorized accounts and did several things to steal money from their customers.
While this may be an egregious example, big banks are inflexible in customer service. National boards with executive leadership enforce their rules. They have little to no insight into the needs of communities.
Conversely, credit unions serve their members and are more flexible regarding customer needs. This makes it easier to get a loan and access other financial services.
Credit unions have lower fees and higher savings rates. They offer more personalized service and make it easier to obtain credit.