Credit Union vs. Bank: Which is Better?

Banks have nothing good to say about credit unions. Credit unions don’t have a lot of appreciation for banks. Their customers of one entity believe the customers of the other are delusional. Which is better? It depends on your location and your needs. Banks and credit unions each have advantages over the other.

1. 1. 1. Credit unions are not-for-profit. While banks exist for the purpose of earning as much money as possible, credit unions exist to provide a service to their members. Excess income can be used to provide lower fees and lower interest rates on loans.
         
         
      2. Credit unions are technologically challenged. Credit unions are often a few years behind banks when it comes to online banking and other online tools. Depending on how you like to bank, this might be an issue.
         • • Thoroughly evaluate the online banking tools before joining a credit union. If online banking is important, a traditional bank could be a better option.
             
             
      3. Credit unions can be harder to join. Some unions only service a particular population, such as teachers or employees of a particular company. There are credit unions open to the general population, but they’re less common. It might require a little work to find a local credit union that will accept you as a member.
         
         
      4. Credit unions pay higher interest rates on deposits. Sometimes as much as 10 times more. Online banks often provide rates that are competitive with credit unions.
         
         
      5. Banks spend much more on advertising. Many banking customers are slow to switch to credit unions because of the tremendous advertising reach of big banks. Keep in mind that the banking customers are ultimately paying for those advertising costs. You’ll have to find your local credit unions since they’re unlikely to find you.
         
         
      6. Banks offer more options. Credit unions offer many of the same products as banks, but with fewer options overall. A credit union might only offer a couple of checking accounts, one savings account, and a couple of credit cards. A bank often has many more options available and can potentially satisfy your need better.
         • • Do you have simple or complex banking needs?
             
             
      7. Banks charge higher interest on credit cards and other loan products. The difference is usually 1-2%. This might not sound like much, but it can be significant when dealing with a large loan over many years.
         
         
      8. Credit unions are more focused on service. While banks want to maximize profit, even at the expense of customer satisfaction, credit unions are owned by the members and place a higher value on service. Members vote on how a credit union handles the day to day activities.
         • • Credit union members consistently report a higher level of satisfaction than bank customers do.
             
             
      9. Banks typically have more locations. Some banks seem to have a branch on every corner. Credit unions often only have a few, or even just one, location. Depending on where you live relative to the local branch, this can be a deal-breaker.

Banks offer more locations, more ATMs, more products, and a higher level of technology. Credit unions pay more interest on deposits, charge less interest on loans, and charge lower fees at the expense of convenience. Which is more important to you? By answering that question, you’ll find the right answer for your situation.

You might be able to have the best of both worlds by having an account with both a bank and a credit union. You’re not limited to just one or the other.