Credit unions are well-known for their lower fees and better rates on credit cards and loans than banks. Although both may serve similar money safe-keeping purposes, their operating systems vary.
So, why does a working system matter so much when you only have to put your money in a safe? Operating mechanisms determine how the financial institutions work. So, the emphasis shifts from ‘what’ the institute does to ‘how’ it does it. Here is more on the matter.
Banks over credit unions – why choose one over the other?
As mentioned, both the facilities are run by different operating systems. Banks are powered by big investors, whereas, credit unions are set up by community members for their counterparts.
These members are brought together by a particular factor such as a political or religious belief. Therefore, to become a part of a credit union, you need to ask around and see if you are eligible to join. Getting a membership is relatively easy though.
Since the system of operations is clear now, it is easy to understand that both the financial institutions differ in the way they serve. For instance, banks and credit unions differ in their approach.
The 4,746 banks in the US are for-profit, so they try to make money on providing you with the services. On the other hand, credit unions are not-for-profit, so they offer better rates on services, lower fees and higher interest rates on deposits.
All this adds points in favor of credit unions and makes them a better pick over banks.
Reasons why credit unions are better than banks
With the primary differences between banks and credit unions being clear now, let’s dive into the specific benefits credit unions offer over banks:
Credit unions serve members
The chief concern of a bank is to meet the interests of the investors. In contrast, credit unions are planned and run by the community members for other community members. So, a credit union always thinks of its members’ benefits.
You need to know if you are eligible for joining. Some factors that determine your eligibility include the location you live in, your membership in an organization, the place where you worship, and the industry you work in among other factors.
A family member who is part of a credit union can also get you a membership. To get started though, you need to search for ’Credit Union Near Me.’ Then go on to find if you can join it.
Better customer services
How many times have you gone to a bank and haven’t been asked to wait? That never-ending wait, poor treatment, difficulty in getting loans, and high rates among other things are all testament to the poor customer services offered by banks.
This is not the case with credit unions. Since they exist to serve their members, credit unions stress on personalize engagement, which is another plus point. On a general note, emphasis over customer experience is on the rise.
By 2020, customer experience is going to rank higher than price and product as the chief brand differentiator. This means that you are not alone when you seek out for a financial institution that prioritizes you.
Offer better charges
Credit unions are nonprofit by nature. This means they have lower interest rates on loans and high rates on savings accounts and certificates of deposits (CD). In fact, credit unions offer better interest rates for both savings and checking accounts.
At the same time, the charges for credit unions are low. Moreover, unlike banks, there is no minimum amount to open an account.
Your money is safe
So many perks may worry you regarding the safety of your money with a credit union. Your amount is safer in a credit union than under a mattress. What’s more, your money is as safe in credit unions as in banks.
Just make sure that you select a credit union that is FDIC-insured. FDIC offers insurance for both banks and credit unions. Therefore, your cash is in safe hands. State-chartered credit unions are privately insured so they may not be as safe as credit unions that are federally insured.
Credit unions provide the same core services as banks do. These include personal loans, online bill payments, home and auto loans, checking and savings accounts, paper checks, safety deposit boxes, CDs, and so on. However, all this comes with improved customer services and better charges, which make credit unions preferable over banks.
There’s a small catch though; credit unions don’t have as many branches in a city as banks do. If that’s a hiccup for you, then you may have to avail a bank’s service or use a credit union’s online service to keep in touch with your money.