Choosing the right financial institution can make a huge difference in managing your finances. Often, this begins by choosing which type of institution, such as a credit union or bank. At a glance, they may seem more or less the same. However, there are key differences between the two that you should be aware of. But are credit unions better than banks? Read on to find out.
What are the similarities between credit unions and banks?
One very important thing these financial institutions have in common is security. Both are federally insured. Credit unions are insured by the National Credit Union Administration (NCUA), whereas banks are covered by the Federal Deposit Insurance Corporation (FDIC). Both the NCUA and FDIC provide the same level of protection and will insure your deposits up to $250,000. So, if an institution fails, you will be able to get at least $250,000 of your money back. You can rest assured no matter whether you choose a credit union or a bank.
In addition, credit unions and banks both offer similar services such as savings and checking accounts, online and mobile banking, home and auto loans, business services, debit cards and so on. They also offer rewards and perks to their account holders.
What are the major differences?
The biggest difference between credit unions and banks is that credit unions are not-for-profit entities that are member-owned while banks are for-profit and owned by investors. This can make a big difference in rates and fees (more on this in a bit).
Large, regional or national banks tend to have more locations and ATMs than credit unions. This can make banks more convenient if you travel a lot or live in multiple cities. Credit unions, on the other hand, are usually part of a surcharge-free ATM network, so you can still avoid most fees.
Another difference? While credit unions typically require you to be a member in order to utilize their services, banks do not. However, the criteria to join a credit union are generally broad enough to include most people, making it fairly simple to become a member and reap the benefits of banking with a credit union.
Why are credit unions better than banks?
Because they are uniquely situated, credit unions offer a number of benefits over banks, making them a better financial option for many people. Here are five reasons why credit unions are better than banks:
1. Credit unions are not-for-profit and member-owned
We’ve already emphasized this, but it really is at the core of why credit unions are a step above banks. Banks are owned by investors with the goal of turning a profit via customers—that is, accountholders, borrowers and so on. This often results in higher costs to the customer.
On the contrary, credit unions are owned by members (account holders, borrowers and so on), not investors. That means all profits earned at credit unions are returned to members in the form of better rates and lower fees And many of the services come with no fees at all. In fact, many credit unions still allow members to add a checking account for free and don’t require a minimum balance.
2. Credit unions allow members to have their say
Credit union members can vote to elect board members to represent them and help make crucial decisions about the strategic direction of the institution. Members have a say because they are part owners, not just account holders.
3. Credit unions invest in the community
Because credit unions don’t have to worry about paying stockholders, resources and funds can be given to great causes, especially those close to home. Credit unions support all kinds of local, regional and national organizations and sponsor numerous community events.
For instance, Solarity Credit Union prides itself on helping the Yakima area and the Pacific Northwest. This includes donating, promoting and partnering with housing efforts, hospitals, schools, humane societies, charities and organizations that are working toward positive change.
Investing in the community also includes providing financial education and resources. Credit unions may offer financial counseling and coaching so that members can make better, smarter decisions.
4. Credit unions are more accessible, flexible and accommodating of their members’ needs
Credit unions offer checking and savings accounts with low or no minimum balance requirements. Keeping a minimum balance in an account can be stressful, especially when you’re going through financial hardship, and many banks charge fees if the balance is too low. If a credit union does have minimum balance requirements, it’s usually a low, more manageable amount. And at many credit unions, checking and savings accounts are free.
You’re also more likely to get approved for a loan through a credit union. If you don’t meet certain requirements, hope isn’t lost. Credit unions can be more flexible about certain things, such as your credit score or closing costs. The thing to remember is that credit unions want members to get loans and achieve their financial goals.
5. More personalized service and a better connection overall
In addition to giving members a voice, credit unions also have a more communal atmosphere. After all, credit unions are part of the local community. They are staffed by community members who understand the local economy and housing market.
Their smaller size also means you get the right amount of attention. Credit unions are member-centered. They offer great customer service on a personal level. The employees are more likely to know your name when you stop in.
Credit unions have employees who will listen to your story, offer solutions and provide guidance. By contrast, you won’t find that with banks. Their policies are often rigid and inflexible. They won’t take the time to consider your unique situation.
Work With a Credit Union
There are many reasons why credit unions are better than banks. And you’ll be able to get all these perks while also knowing you have the same account options, convenience and level of security as a bank. Now, it’s just a matter of finding the right credit union for you.If you’re in the Pacific Northwest, join Solarity to take advantage of all the credit union benefits. You can find more information about becoming a member of Solarity Credit Union on our website. We’ve made it easy, too. It only takes a few minutes to apply online. So, what are you waiting for? Come experience the credit union difference for yourself!