hands with money at bank office or exchanger

Banks Vs Credit Unions

Banks

Banks are financial institutions that have been licensed to receive client deposits, make loans, provide wealth management services, currency exchange, and other services such as safety deposit boxes. Different types of banks exist such as retail/commercial banks, corporate banks, and investment banks. For more on banks, see https://www.investopedia.com/terms/b/bank.asp

Credit Unions

Credit Unions are financial cooperatives that provide traditional banking services similar to that of commercial banks. For someone wanting access to more in-person facilities and larger institutions, banks may be the option they want. However, as credit unions don’t need to generate profits the way banks do each year, they tend to offer higher interest rates on savings and lower borrowing rates for their members. To learn more about credit unions, visit https://www.investopedia.com/terms/c/creditunion.asp

Differences: 

  • Credit Unions are created, owned, and managed by their members whereas banks are owned by investors/shareholders.
  • Credit Unions are exempt from paying corporate tax on their earnings whereas banks must pay
  • Historically Credit Unions were limited to members sharing a commonality such as working in the same industry or company. Within the recent past, however, those restrictions have been loosened and the general public can join credit unions.
  • Banks are for-profit institutions whereas credit unions are nonprofit institutions
  • Credit Unions only need to generate enough earnings to cover the expense of day to day operations; banks however are expected to increase profits year on year
  • As Credit Unions have narrower profit margins than banks, they can offer higher interest rates on deposits and charge lower fees for other services such as ATM fees and checking/savings account maintenance fees.
  • Banks are generally much larger institutions than credit unions and have more locations for the general public to access traditional brick and mortar facilities
  • Credit Unions don’t have the same size budget as banks so their technology access such as websites and communication tend to not be on par with banks.
  • Banks tend to offer a wider array of options on their financial products than credit unions.

Both institutions are built to serve the financial needs of their clients. As for which type of institution you choose, you need to assess what you’re getting and what it’s costing you to use the financial products offered by each and any institution. You can do this easily on https://www.thefinroute.com/. Ensure your hard-earned dollars are getting the best value you deserve.

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