Is the Right Choice For You a Bank or a Credit Union?
By Teresa Ambord
If you're soon to be in the market for a loan, it might be a good time to think about where you do your banking. If you've been a customer of your bank for many years, that might work in your favor. Then again, credit unions are often able to offer lower credit rates.
Banks and credit unions each offer distinct advantages. Which institution is right for you depends on your daily needs as well as your plans for the next several years. Here are some of the features of banks and credit unions to help you decide which works best for you:
Banks
- Generally owned and run by corporations.
- Profit oriented, therefore, the bank is subject to income tax. This may mean their loan rates are somewhat higher and interest paid on investments, lower.
- Able to offer many products.
- Larger banks usually have many locations.
- May have ATM networks available in convenient locations.
- Fees are kept somewhat low by competition with credit unions.
- Anyone can become a customer.
- Accounts up to $100,000 are insured by the FDIC (Federal Deposit Insurance Corporation). So, when choosing a bank, make sure they sport the FDIC insignia.
Credit Unions
- Owned by members (depositors) and governed by an elected board of directors.
- Members have a say in the operation of the institution.
- Non-profit, therefore no income tax paid. This may mean they can offer lower loan rates and higher rates on investments.
- Some are able to offer many products, though usually fewer than banks. If having a credit card where you bank is important to you, this may or may not be available through a credit union.
- Fewer branches, therefore, less likely to be conveniently located unless it is run by your employer and on the premises where you work.
- Accounts up to $100,000 are insured by the National Credit Union Administration (NCUA). Just as with banks and the FDIC insignia, a credit union that you choose should boast the NCUA insignia.
Bankrate does a monthly survey of rates for banks, credit unions, and thrifts. Click below to see the latest updated survey. Generally you will see that while credit unions offer better rates on some products, banks or thrifts beat them in other areas.
If you decide to check out a credit union, the next hurdle may be to find one. Since membership is limited, you generally must belong to a particular group, though for many, the net of potential membership is cast far and wide.
You can start by logging onto the Credit Union National Association (CUNA) Web site below, or by calling them at (703) 518-6330.
The easiest way to join of course, is if your employer has a credit union, which, for bigger employers, may be on the same premises as your job. Or many businesses join credit unions so that their employees can have easy access to membership. Ask your personnel department if the company has a relationship with a credit union.
Here are some other ways to find a credit union:
- Many churches and synagogues also has credit union affiliations.
- Clubs and civic organizations may offer membership.
- Ask friends and family for referrals.
- Or... just look in the yellow pages. Many are listed by the type of members they serve, such as Electrical Workers Federal Credit Union. For others, the names don't offer clues, such as Members First Credit Union. But it's easy enough to call and find out.
The choice between a bank and a credit union should be fairly easy. The question is, what's most important to you? If you want easy access, lots of ATMs, and no requirements for membership, you probably want a bank. Then again, if you will soon need to finance a large purchase like a home a or car, credit union membership might mean lower rates on loans (though not always). If you're going to invest, you may find higher interest available on CDs. The choice depends on you.
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