We may be a little biased (we are Generations Federal Credit Union after all), but when it comes to choosing the right type of financial institution, here are the facts.
How are credit unions and banks different?
The real difference comes down to ownership. Credit unions members own their non-profit financial instituion. This means they offer their products at the most favorable terms they can afford to their membership. This typically results in lower and fewer fees, as well as higher interest rates on savings products.
Banks, on the other hand, are for-profit institutions that pay dividends to their owners and shareholders. Banks typically have more physical locations and may roll out technological advances faster than credit unions.
Another key difference between the two is membership eligibility. Credit unions serve a limited customer base that shares a common bond, which may be a geographic area, an employer, a school, a religious organization, or something else. Banks do not typically require membership eligibility.
How are they the same?
Credit unions and banks generally offer similar products and services, including checking and savings accounts, loans, credit cards, investment services, and sometimes insurance. Both also offer similar technological services, such as online banking, mobile apps, mobile check deposits, and more.
Additionally, whether you choose a credit union or bank, you can rest easy knowing your money is insured up to $250,000 should the financial institution ever go under. The National Credit Union Administration (NCUA) insures federal credit unions while the Federal Deposit Insurance Corporation (FDIC) insures for-profit banks. (This does not, however, insure money you’ve invested through the institution.)
What to Ask Before Choosing
How many locations does the credit union or bank have? (And is this actually important to me?)
If you conduct your transactions primarily through online or mobile banking, the number of locations may be less important than the technological capabilities of your financial institution.
What fees does the credit union or bank charge?
You’ll want to research the cost, as well as what you receive in return, for paying a fee. In some cases, the benefits outweigh the cost of the fee.
How are decisions made on loans and credit products?
Often, the larger the institution, the more automated the decision making on loans and other products. If you’re looking for a more personable decision, working with a local credit union may be your best option.
Making Your Decision
Ultimately the right type of financial institution for you will depend on your personal financial needs and level of comfort. If you’re interested in becoming a member of Generations Federal Credit Union, you can start the process here.
Samantha Salazar is a University of Texas at Austin alum who has worked in the finance and marketing industry since 2011. She has a background as a CUNA Certified Credit Union Financial Counselor and is a Class II graduate of the Latina Leadership Institute (LLI). True to her millennial nature, Samantha loves coffee, covers her home in hanging plants, lives a frugal lifestyle, and works hard so that her dog, Olive, can have the backyard she deserves.