Bank or credit union: which one do you use? And what’s the difference anyway?
The biggest difference between these financial institutions is ownership.
Banks are run for profit and, as such, are responsible to their stockholders. Credit unions, on the other hand, are non-profit entities, owned by their very membership.
Without a demand for ever-increasing profits from shareholders, credit unions can avoid feeing you to death, and regularly offer services at considerably lower rates.
There’s usually a substantial difference in size, as well.
Typically, credit unions are much smaller than banks. Banks often employ thousands of people across the globe, and have branches in many major cities. Meanwhile, credit unions are usually smaller operations, with just a fraction of banks’ brick-and-mortar presence, (though larger credit unions also exist).
This disparity in size can redound to customers’ benefit—the smaller credit union can offer a greater degree of personalization and familiarity with your specific personal finance needs, where big banks often have no choice but to treat you as one of countless thousands of accounts. This can help when it comes time to, say, applying for a mortgage. By knowing your situation (and the community’s) better, you can sometimes negotiate your way to more favorable terms.
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Naturally, customer service varies from bank-to-bank and credit union-to-credit union, but frequently and by reputation, credit unions seem to hold the upper hand in this category. With fewer customers to serve, the folks working at a credit union are able to become better acquainted with specific individuals and their various accounts.
However, before you rush out and transfer all your funds to a credit union, there are some limitations imposed by their smaller stature, as well.
Larger banks can offer more products and services than credit unions can, and even if they don’t know you personally their help and support lines are routinely staffed 24-7/365—which, of course, can be critical.
So, there’s no right answer as to which is “better”—it’s a matter of individual preference and need.
But these days, in the wake of financial meltdown and accompanying recession, many people are taking a look at the structure of their personal finances and wondering whether or not they’re getting the most out of their money—and their bank.
As a result, credit unions are getting a lot of attention. And some folks aren’t even looking to eighty-six their bank outright, but are diversifying some of their accounts with bank/credit union blends.
Which one is right for you—credit unions or major banks? Which one do you use? Are you looking to switch? Tell us your thoughts on the subject.