Banks Vs. Credit Unions: Which Should You Choose?

When it comes to banking, you have a lot of options. There are so many different types of banks – from large institutions serving the whole country to smaller local credit unions – that it’s hard to know which one is the best option. You want your money to be in a safe place, preferably one that will reward you for saving for the future, so which one should you choose?

What Is a It?

A credit union is a non-profit organization that exists to serve its members, who are considered the owners, by giving them a safe place to do their banking while providing reasonable rates. Members can do all the same functions there as they can at traditional banks, such as checking, saving, and borrowing.

What’s the Big Difference?

-Membership. Credit unions usually serve a specific group of people as members. Membership is often based on employment (such as state government employees), association with some other organization (such as a university), or community.

-Interest rates. Since they exist to benefit members, credit unions typically offer lower interest rates on loans and higher interest rates on savings. Keep in mind this isn’t always the case. Interest rates vary from one organization to another and from one community to another, so do your research to find out which organization in your area offers the best rates.

-Fees. The fees charged will again vary from one institution to the next, but credit unions tend to have lower fees (or sometimes no fees at all) for certain types of accounts. Many of them also don’t require a minimum deposit. However, there are some banks that don’t charge fees or require a minimum deposit amount either, so again, you’ll want to research the options for your area.

-Profit. As mentioned earlier, this is where the two differ the most. Since credit union members are shareholders, they are the ones who benefit from profits in terms of dividends, better interest rates, and lower fees. Banks, on the other hand, seek to make money and appeal to investors instead of members, so account holders don’t benefit from their profits.

Which One Is Right For You?

There’s no right or wrong answer here. It really just depends what you’re looking for and what’s offered in your community. Both have advantages and disadvantages, so it’s up to you to research your options and decide for yourself that is right for you.

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