If you are tired of paying money to use the ATM or for just keeping money in your account, you may be on the hunt for a new place to park your cash. If that’s the case, make sure to also consider credit unions. They typically offer better rates in comparison to banks. But, the downside is that you need to be a member of a credit union to open an account there or get a loan. Banks, in comparison, have no such restrictions. Here, we compare some of the key pros and cons of credit unions and banks.
What Is a Credit Union?
Unlike traditional banks, credit unions are non-profits that are governed solely by their members, many of whom also serve as the board and committee members. Credit unions offer a lot of services that regular banks do. For instance, you can open a savings and checking account, invest in an IRA or CD, or get a mortgage or car loan from a credit union.
Pros of Credit Unions
– Eligibility requirements are a lot less rigid
– Interest rates are low
– Deposits you make are insured
Cons of Credit Unions
– Not as many physical branches
– Not everyone can join every credit union
How Different Are Banks from Credit Unions?
The main difference between a credit union and a bank is that a bank is essentially a for-profit organization. Most banks are also double the size of credit unions, and, hence, have many more branches as well.
Pros of Banks
– You can access a range of resourceful online tools, apps, and features
– Gives you added convenience
Cons of Banks
– The eligibility requirements may be a little stringent
– Interest rates on deposits are lower and rates on loans are higher
– You may have to pay more transaction fees
Many consumers prefer credit unions because they say a credit union offers a more human touch that most banks can’t match. However, most credit unions don’t match up to the type of technological perks that banks offer. And, they are also not as physically accessible as a large bank would be, with its numerous branches. Still, if you are looking to open a new bank account, it makes sense to check out the rates and terms offered by both banks and credit unions.