People often wonder what the differences between banks and credit unions are. You can have similar accounts at both. The funds are both guaranteed up to $100,000. The biggest difference between a bank and a credit union is that banks are for-profit organization and credit unions are nonprofit institutions. This can be a real plus for anyone who has an account at a credit union.
Many people consider using a credit union to finance a car or a home. The interest rates are generally lower, and the credit unions are more likely to work with you. The terms are easy to set up and it may be easier for first time borrowers to go through a credit union. You may be thinking that if the rates on loans are significantly lower, than the interest rates for checking, savings and money market accounts must be lower as well. This is not the case. You can generally earn much higher interest rates at a credit union than you could at a bank. The reason that credit unions can do this is that are not looking for profits the same way that banks are. The only costs that they take out of interest rates are generally operational, and so the savings are passed on to their members.
There may be a few disadvantages to using a credit union. The credit unions are smaller, and so it may be more difficult to find ATM’s outside of your local area. If you move a great distance you may need to transfer your account, which you would not have to do if you banked with a bigger bank. You may not qualify to join a credit union, as you must belong to a specific group of people in order to join. Some credit unions do not offer business accounts.
Many banks are larger and can offer more locations. You can also find a few services at banks that you can not find elsewhere. You may not want to leave a well-established account for a credit union. Many banks can span several states, while credit unions are fairly limited to being small and local. Banks often offer longer and more flexible banking hours. Banks offer a full range of services for business customers.
Banks are in the business of turning a profit. They may not be as understanding when it comes to returned checks or late payments. The interest rates may not be as high. The tellers and other customer service representatives may not be as helpful. Many banks are limiting the number of teller transactions you can have in a month without incurring a fee.
You will need to decide which institution will work better for you. You are the consumer, and you should shop around for your bank or credit union just as you would shop for a car. You should consider customer service policies, location, services offered, service fees, and interest rates before you make your choice.