The major differences between credit union and commercial banks are all written on this page. Making money is one difficult thing, but saving it the right way is even more difficult. It is a known fact that you have many alternatives to choose from when deciding the best place to save your money. If at any time you feel a bit of any confusion about choosing between a commercial bank or a Credit Union, you have to thinks straight. Why? Because there are major factors you need to put into consideration. Note that, these two financial institutions have their own advantages and disadvantages. Besides, it is best to know the major difference. This will enable you to know where to put your daily money, weekly or monthly savings. We will walk you through the differences between a commercial bank and a credit union.
There are also some similarities between banks and credit unions. This means that Commercial Banks and Credit union arguably offers similar financial service to their customers. But, there is also distinct difference between a commercial bank and a credit union. The biggest difference between a commercial bank and a credit union is that a bank is a majorly for-profit institution while credit Unions are for non-profit institutions. Truly, you may be wondering what this statement means. The simple explanation is that banks are in the business of enhancing profits and issuing dividends to their stockholders. On the other hand, credit unions put back every profit they get into their member’s needs by making use of cheaper fees, smaller interest rates, more ATMs, and added locations.
What is a Credit Union?
The definition of a credit union is simple. Credit Unions are a non-profit financial institution that is co-owned by their registered members. The union provide the same financial service as any bank. But, all the profit made during transaction is returned back to members through advantages like smaller interest rates. In a long run, all members usually benefit in form of a low-interest rates on loans, better rates on deposit/savings accounts. But Credit unions have a basic membership registration requirement which is based on where you live, place you work or worship or even the type of people, you associate with.
What is a Bank?
In simple definition, a bank is a financial institution with the authorization to hold and lend money to customers. The bank offers a lot of financial services which include checking and savings account, credit cards, personal loans, mortgages, car loans, small business loans, and more. There are different type of bank; commercial, mortgage, agricultural, as well as micro finance bank. They can select what service they want to offer and where it wants its operations to be at a given time.
Why choose a Bank over Credit Union
There are people who prefer in-person interaction for transactions about money. If you fall under this list, then a bank will be a better option for you to save up your money. We all know that commercial banks have several branches all over our local community and across the country. In addition, they as well provide both new and advanced technology (continuously) in order to give its users an exclusive banking experience.
Why choose a Credit Union over a Bank?
Since we have earlier mentioned that credit unions are a non-profit institutions, it cares about its users. Meaning that Credit Unions put the needs of their members as top priority. Additionally, they also ensure to set up simple terms and conditions for their members to enjoy the benefits. Furthermore, they offer higher interest rates on cash deposits than almost all local banks. Again, they offer a far lower-interest rates on loans to their members. You can scan through the CCFCU Loan Interest rates – Central Coast Federal Credit Union (Auto, House and Personal).
What Should I Consideration before choosing between a Bank and a Credit Union? Check Similarity and Differences.
1. Choosing between these two involves some balance:
Federal Credit unions majorly provide higher interest rates on cash deposit/savings and lower interest rates on all type of loans. In the second place, banks usually brings-in new technology for transactions. They always have new tools, especially in online banking services. However, these technology comes with higher-than-average interest rates. Note that, conventional Banks have a lot more ATM and branch networks than the credit unions. While Credit unions usually belong to large ATM Network corporations, for example; All-point.
2. Banks are for-profit institutions while credit unions are non-profit institutions:
Commercial Banks are for-profit institutions because they have Stock and shareholders. Because of this, banks are focusing at enhancing their profits in order to make more profits for their many investors. As a result, they provide service to all of their customers. While credit unions are made to serve their members only. Federal Credit Union provides financial services to its members on the most beneficial terms that it can offer. The downside is that membership depends on location, workplace, worship centre, club or association, etc.
3. How many branches and ATMs do they have:
These days, internet and mobile phone is a trending technology both the young and old craves for. But if you would prefer in-person service to online banking service, then you should seriously consider the number of branches available? More importantly, you can make use of the Credit Union Near Me Locator to check out for a local branch around you. You can also look up a community bank if you would like to deposit your money in the commercial bank.
4. Financial service and products:
Unlike Federal or State Credit Unions, the bank offers a wide variety of financial services. Banks provides commercial and banking products like checking and savings account, Credit cards, auto loans, business loans, business credit cards, and more. They also offer investment options to customers. Why do credit unions provide fewer financial products than the banks most especially in the business areas? However these days, credit union are coming up with more products every time.
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Are Credit Unions safer than banks?
Thankfully, Credit unions and banks are both considered to be safe. Banks are insured federally by the FDIC or the central bank. While Credit Unions are also insured by the NCUA. On the long run, both financial institutions are both considered to be Safe for savings and withdrawal.
Finally, we have been able to show you the biggest Difference Between a Commercial Bank and Credit Union. We were also able to give you some major similarities of a bank and a credit union. With these explanations, we hope you can now easily decide where you would like to save your money and have rest of mind.