The credit unions vs. banks issue can be confusing until you find out their differences, pros, and cons. Looking at the key differences of both, such as interest rate, profit models, and branch access, can help you decide which one is best for you.
Credit Unions Vs. Banks – The Main Differences
Credit unions issue credit union cards. A credit union card is different than the normal credit card you get from the bank. They have a low interest, low fees, and are more consumer-friendly than the regular credit cards. Credit union cards charge very little to no balance transfer fee, unlike major card issuers who charge three to five percent. Although credit cards from banks have high interest and annual fees, they are most secure and also provide maximum cashback rewards.
Both credit unions and banks provide similar services of savings and checking accounts, business accounts, and loans. But still, many people do ask what a credit union is and how it differs from the bank. Credit unions are non-profit and provide services based on membership associations. Credit unions are known for lower fees and interest rates with better customer services than banks.
But the non-profit nature of credit unions may fall short for long-term investment. The tax exemptions on services may not be suitable for every customer. They are a little behind banks on technology, user-friendly apps, and convenience.
Banks, on the other hand, do have higher fees but easier access, convenient locations, and better technological developments. This has made banks more favorable for those who heavily rely on mobile and online banking.
When it comes to investment, there is no clear cut answer to which one is better. Determining your income, expenditures, and the way you invest should map out the banking method you choose. If you earn well and have high expenses on several credit cards, then major credit card issuers will give you a good cashback reward. If you invest a good amount of money in your retirement plans, it is wiser to stick to your regular bank services than opting for a credit union. If budgeting is your main concern, then a credit union is a better option for you. But for a long term investment, the bank is an ideal choice.
Making Your Choice
To choose between a credit union and bank, you need to identify what matters most to you and prioritize the benefits of both accordingly. If you are concerned about budgeting, then you can benefit a lot from the credit union services. They provide better services than most banks and charge nearly half of what banks do. Although there are many similarities between banks and credit unions, here are the basic differences summed up, which we have discussed so far.
- Fees and interest rates are lower in credit unions and higher in banks.
- Credit unions prioritize customer service and personal interactions more, whereas banks generally don’t.
- National banks have many regional locations and more branches. Credit unions, on the other hand, have fewer branches that are connected by the same network.
- Credit union cards are cheaper to use but are less secure, and have fewer cashback rewards than what you get from bank credit cards.
- Banks are farther ahead in technology and user-friendly banking methods than credit unions.
In most cases, terms of fees, interest rates, security, long term investments, and services are the factors you have to consider when pitting credit unions vs. banks. You should probably have an idea of what is most suitable for you after determining the key differences.