If you’re like most people, your bank account is just something you have.
You may have gotten an account because of the branch’s proximity to your home (and general requirements for debit cards everywhere you go).
Or maybe you spent the time looking for the best bank in your area and one that offered you the most perks for signing on.
Bank accounts are no doubt familiar to you. But if you’re not paying attention, you could end up with that same account for years – if not decades. That could end up costing you more than you know.
That’s because while you’ll definitely need an account somewhere to shop online or in stores, you don’t necessarily need to have a bank account.
Instead, you could opt for a credit union instead of a bank account. This could help you save on:
- Outrageous account fees such as the ones at the ATM.
- Fees on secondary savings accounts.
- Additional fees on check deposits, or even on online bill payments.
- Fees on accidental overdrafts.
It’s entirely possible to avoid the fees if you keep a certain minimum amount in your account, cut off overspending, or enroll in direct deposit. However, this isn’t a feasible option for most people.
Like a bank, credit unions can give you a federally insured account and access to ATM groups across the country.
What is a Credit Union?
Credit unions are non-profit organizations who are there to serve their customers and not the board of directors or share holders.
Credit unions offers the same services as any other banks, and are just as safe.
How Are Credit Unions Different Than Banks?
Sure, they tend to be smaller than banks and may not have an ATM on every corner of your neighborhood. But, that’s one of the differences between a credit union and a bank.
Because they’re smaller and run as nonprofits, credit unions tend to take each customer and account more seriously. That can mean better perks for members.
In most instances, credit unions and banks can be considered one and the same. You can get the same services from a credit union as you can from a bank such as a checking account and a savings account.
Additionally, you can get a mortgage, car loan, and investment products such as CDs and IRAs from credit unions.
While some people think that you need to be active-duty military, work for the government or be a teacher to join a credit union, that’s not the case for most credit unions. Most credit unions are simply local establishments. There are plenty of credit unions near you if you look them up.
The Pros and Cons of Credit Unions
Pros of Credit Unions
For those that may be worried about whether credit unions aren’t as safe as banks, don’t be. Credit union deposits are insured just like deposits to any FDIC-insured bank.
That makes credit unions and banks equal when it comes to the safety of your money. There are even various benefits of banking with a credit union vs. a traditional bank.
To start off, credit unions typically have less stringent requirements for loans and other perks. That can mean getting a better rate on loan terms via a credit union as opposed to with your local bank.
On a side note, if you have student loans, be sure to check out our post on the revamped Public Service Loan Forgiveness (PSLF) plan. You may be surprised to find that you’re now eligible if you weren’t before.
You also won’t be nickel-and-dimed by a credit union. They typically offer most of their services for free as long as you have an account with them. Plus, their accounts are almost always free as well.
Eligibility requirements are considerably less rigid with credit unions vs. banks. That can mean qualifying for something with a credit union that you wouldn’t normally get at a traditional bank.
Cons of Credit Unions
That said, credit unions don’t typically have the breadth of services of a bank. There are significant limitations. For example, they don’t have the vast offerings of retirement account options that banks may have.
A much-reduced footprint with branches and ATMs is also to be expected. There will be fewer opportunities to do your banking with a credit union when you’re out and about.
What About Banks?
While credit unions are run as non-profits, banks are overtly the opposite. Banks never miss an opportunity to up-charge you for goods or services. Things like online banking, printed checks, and transferring your money in and out of your account will cost you extra. These are typically free or included with your credit union account.
However, banks tend to have more tools, features, and cutting-edge tech. Their website and apps are much more developed and user-friendly.
Most credit unions may have a functional app and website these days. However, you’ll find that they’ll likely lag behind in terms of features you may need. This includes remote depositing of checks via app, online bill pay, and other advanced features.
Is Registering With a Credit Union a Good Idea for You?
Evaluating whether you should go with a credit union vs. bank can be difficult because you’re not really comparing apples to apples.
If things such as advanced online bill pay or depositing checks via an app are important to you, it’s a good idea to check the capabilities of your local credit union to determine if they’re a true replacement for your bank.
While credit unions typically have eligibility requirements to join – such as living or working in a certain community, being active duty military, or the family of a qualifying member – it’s true that most consumers qualify in some way to join a credit union. If there’s a credit union close to where you live or work, you’re probably okay.
Credit Union vs. Bank: The Takeaway
As a member of a credit union, you generally get lower interest rates and better service overall, among other perks. On big-ticket items such as a car or home loan, that can translate into a considerable amount of savings at a credit union.
Furthermore, credit unions are also better than banks at giving you better (higher) interest rates for the money they hold for you. From a financial standpoint, credit unions have the edge.
However, from a technological and convenience standpoint, banks win by a large margin. If you need the latest features and tools at your disposal, you’re much more likely to go with a bank than a credit union.
For those that travel a lot and need reliable access to banking services such as ATMs on every corner, you may want to opt for that traditional bank as well.
Larger banks have a much more comprehensive offering of services than their credit union counterparts, and that can make or break the decision. And it has.
Banks clearly are the more popular choice currently, and that speaks volumes to the importance of convenience for Americans. And the marketing. But remember, you don’t have to follow.