Credit Union vs Regular Bank, which one is better?
Credit unions vs. traditional banks is a topic that generates a lot of debate and differing viewpoints. Some people think big banks are evil. While some consider credit unions nothing more than juvenile clubhouses. Is one necessarily superior to the other, though? The following discussion aims to clear up the confusion.
Regular banks are big commercial organizations that can provide customers with a wide range of banking products and technological services. Whereas credit unions respect and value their members more than anything. Plus, they grant the highest possible interest rates on their members’ savings.
To put an end to your hesitation and make a clear comparison between the two financial entities, invest some time in the following sections.
The Pros And Cons Of Banks
To fully comprehend the matter of credit union vs. regular bank, let’s first look into the pros and cons of a regular bank. There are many good things about putting your money in a bank. And in that same vein, some things might be off-putting.
Banks are all about profit
For starters, consider the status of a bank as an organization. They exist solely to make a profit for their owners. If the banks don’t make money for their investors, there is no point in their existence.
As a result, banks always put the interests of their owners in front of their customers. Although they might never say so in their advertisements, this is the truth. This also means a customer doesn’t get a vote on how the bank will run.
The crude corporate nature of the bank also reflects on how they behave with their customers. They are only nice to you as long as you are moving good amounts of money or returning their loans (along with interest) on time. Any deviation from that can instantly turn the bank hostile towards its client.
On the other hand, banks, being for-profit organizations, are open to everyone. Anyone with money can participate in their banking process. Unlike unions, which are strictly membership-based.
Offer more products but also higher interest rates on loans
As banks are all about making a profit, they are always bringing in new products to lure more customers. This is a great advantage of being with a bank. Banks can provide you with a large number of business loans, retirement accounts, money market accounts, credit cards, and other services.
However, the interest rates on these loans are high. Then again, the bank is more interested in making money off of you than being your friend.
Plus, banks charge you significantly for even the little things they do for you. They take money each time you use your ATM card when a check bounces, and they set minimum balances for your account to be viable.
Advanced technological services
However, if you run a big business, you cannot function without a bank. Because banks are always focused on profits, they are, naturally, ever-growing organizations. This is why they can afford more technology and can provide more useful technical services to their clients.
For example, regular banks provide the most sophisticated online and mobile banking services. And there is no doubt that these services have made people’s lives much easier. Plus, these safe and secure forms of remote banking have also made it possible for countless entrepreneurs to build and run businesses on the internet.
The Pros And Cons Of Credit Unions
Now, let’s have a look at the pros and cons of credit unions. Firstly, unlike banks, credit unions are nonprofit organizations. Plus, they are not owned by investors hell-bent on making some money. Instead, the members of the credit unions are the owners of the organizations.
Doesn’t care for profit but is Members-Only
What this means is that credit unions don’t serve customers. They exist solely for the betterment of their members. This is why they keep their service charges and interest rate on loans as low as possible. Meanwhile, they try to give high interest on savings.
This also means the people who put their money in a credit union get a vote on how the organization will run. However, it is a strictly members-only organization. And usually, the memberships are limited to people from a certain company or community.
Lesser Products and Tech services
A major disadvantage with credit unions is that they cannot offer you big products like commercial banks. Usually, a checking and savings account is all you get, although there are slight variations. But it is highly unlikely that a credit union can provide you with loans big enough to start or keep afloat a large business.
Also, being small and non-profit organizations, credit unions can offer fewer technological services to their clients. It is not impossible to find remote or digital services offered by credit unions. However, these services don’t stand a chance against what banks can offer.
Credit Unions Vs. Regular Banks: Which Is Better?
The above discussion yields some solutions to our dilemma. And you might have understood that one is not essentially better than the other. Both have their merits and demerits. And it is up to you to decide which will work for you. The choice will depend on the kind of financial work you are looking to do.
First of all, if you are not a part of a company or small community, you will most likely not be able to get into a credit union. In that case, dealing with the bank is your only option.
When you have both options, consider the kind of business you are into. If it is just a savings account you are trying to create, a credit union is certainly preferable because you will get excellent customer service and higher interest rates.
However, keep in mind that credit unions don’t have numerous branches like commercial banks. Withdrawing money can be a problem unless the credit union’s office is in your locality.
If you are setting up an account to deal in the money market, or for your retirement, then commercial banks are your best option. The same applies if you are looking for a large loan to start a large-scale business. Because credit unions usually don’t hold that amount of money or are not capable of granting huge loans.
On the other hand, if you are planning on starting a small-scale business limited to your locality, get a loan from your credit union. Because the interest rates are low.
Lastly, if you have an online business and need to set up payment gateways, regular commercial banks are your best and probably the only option.
What you may have gathered from this discussion is that the matter of credit union vs. regular bank does not have one simple solution. One does not necessarily reign supreme above the other. Rather, both play an important role in the field of finance and have their uses. And you can get the benefits of both if you work smart.