What do banks offer that credit unions do not?
More financial products and services: Banks offer a variety of products and services, while credit unions tend to stick with a few core offerings, such as deposit accounts, credit cards and loans. Many banks provide investment accounts and financial advisory services in addition to standard banking products.
What Are the Major Advantages of Credit Unions? Credit unions typically offer lower closing costs for home mortgage loans, and lower rates for lending, particularly with credit card and auto loan interest rates.
The main difference between the two is that banks are typically for-profit institutions while credit unions are not-for-profit and distribute their profits among their members.
Limited accessibility. Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network such as Allpoint or MoneyPass.
Banks seek to make a profit for shareholders; credit unions are nonprofit. Banks charge fees for all of their services; credit unions do not charge fees. Banks tend to allow only certain people as members; anyone can open an account at a credit union.
First, bankers believe it is unfair that credit unions are exempt from federal taxation while the taxes that banks pay represent a significant fraction of their earnings—33 percent last year. Second, bankers believe that credit unions have been allowed to expand far beyond their original purpose.
People choose banks primarily because of the convenience of multiple branches across the country, along with better technology. On the flip side, people choose credit unions primarily because of discounted loan rates, higher interest rates and better customer service.
But compared to banks, credit unions tend to be smaller, operate regionally and are not-for-profit. In many instances, they offer lower rates on loans, charge fewer fees and offer better interest rates for deposit accounts than traditional banks.
Banks | Credit unions |
---|---|
No membership required | Membership required |
Generally lower savings rates and higher fees | Often higher savings rates and lower fees |
May be national or local | May be national or local |
Both Wells Fargo and Bank of America can be good choices for low-income earners since the direct deposit minimums are not overly burdensome.
What is a weakness of a credit union?
Weaknesses of Credit Unions
The membership of a credit union is restricted to a specific community, most often a religion, profession, or geographic location. For a member to be eligible to join a credit union, they must belong to a group listed in the credit union's charter.
Experts told us that credit unions do fail, like banks (which are also generally safe), but rarely. And deposits up to $250,000 at federally insured credit unions are guaranteed, just as they are at banks.
- Better interest rates on loans. Credit unions typically offer higher saving rates and lower loan rates compared to traditional banks. ...
- High-level customer service. ...
- Lower fees. ...
- A variety of services. ...
- Cross-collateralization. ...
- Fewer branches, ATMs and services. ...
- The biggest negative.
With a credit union, you might have to do some extensive research to compare accounts and find out what services they offer. Credit unions only serve certain groups of people and if the ones you can join don't have mobile banking or their apps aren't up to par, that could potentially be a major disadvantage.
The Federal Deposit Insurance Corporation (FDIC) provides insurance for bank deposits, and the National Credit Union Administration (NCUA) does the same for credit unions. Whether you choose a bank or credit union to deposit and hold your money, your funds are generally safe.
Account | Forbes Advisor Rating | Annual Percentage Yield |
---|---|---|
EverBank Performance℠ Savings | 4.5 | 5.15% APY |
Varo Savings Account | 4.5 | 3.00% to 5.00% APY |
Laurel Road High Yield Savings® | 4.5 | 5.00% APY |
BrioDirect High Yield Savings Account | 4.4 | 5.35% APY |
Like banks, which are federally insured by the FDIC, credit unions are insured by the NCUA, making them just as safe as banks. The National Credit Union Administration is a US government agency that regulates and supervises credit unions.
- Alliant Credit Union. Alliant offers an above-average interest rate for savings. ...
- Consumers Credit Union. ...
- Navy Federal Credit Union. ...
- Connexus Credit Union. ...
- First Tech Federal Credit Union.
Credit unions do fail from time to time, too, and have seen a few more failures in recent years than banks.
If you want higher deposit rates and don't need access to branches across the country, for example, you might prefer a credit union. If you want access to in-person services and don't mind lower interest rates, a bank might be more suitable.
Can the government take your money from a credit union?
Through right of offset, the government allows banks and credit unions to access the savings of their account holders under certain circ*mstances. This is allowed when the consumer misses a debt payment owed to that same financial institution.
- Capital One 360 Checking: Best online checking account.
- Chase Total Checking®: Best for a large branch network.
- Axos Bank Rewards Checking: Best for online account options.
- Discover® Bank: Best for doing all of your banking at one place.
- Synchrony Bank: Best high-yield savings account.
Any income the credit union generates through interest, fees and loans is then used to fund community projects, reinvest into the organization or provide services that directly benefit members, like paying higher savings interest rates.
Are Credit Unions FDIC insured by the government? No, the Federal Deposit Insurance Corporation (FDIC) only insures deposits in banks. Credit unions have their own insurance fund, run by the National Credit Union Administration (NCUA).
Higher returns, better savings, low interest on borrowings, and a sense of community – these are just a few of the benefits of credit union membership.