Credit Unions vs. Banks: How to Determine Which One is Best for You

Selecting which type of financial institution to handle your personal or business banking account largely depends on your financial needs and personal interests.Banks offer a wide range of services and are more accessible to customers on a larger scale. For example, if you have an account with a branch of Chase in Michigan, you can access that same account at any Chase branch and ATMs in Texas. This makes it easy if you are a frequent traveler.With a credit union, you have limited ATM access all across the country. Credit unions typically have a limited number of branches, making it difficult if you need this type of access.Banks are for-profit financial institutions owned by shareholders, not customers, of the bank. Their primary goal is to generate profits which they return to shareholders in the form of dividends.In comparison, credit unions are member-owned and operated. A credit union is a collaborative, not-for-profit financial institution formed to supply credit to its members who are also its customers.Another factor to consider is what type of fees banks and credit unions charge to manage your accounts.  With over 50 fees that a typical bank can charge customers, it is essential to identify the fees each financial institution will impose when opening an account.For example, banks generate substantial revenues from interchange fees they charge to retailers for debit transactions. These fees are something that customers never really paid attention to because the fees were imposed on the retailer.But with recent regulations, the fees most banks can charge retailers will be cut from 44 cents to a cap of only 24 cents.With a credit union, this is not an issue because a credit union’s priority is to serve the needs of its members rather than to make a profit for shareholders.  Because of this focus, a credit union is able to keep interest rates on deposits higher and loan rates and fees lower.         Here’s a quick comparison of the key differences between credit unions and banks:Credit UnionsBanksNot-for-profitProfit-orientedReturns profits to members with lower loan rates, higher savings rates, and free or low-cost services.Returns profits to shareholdersEach depositor is a member with share of ownership.Customers have no ownership in the corporation.Members elect a volunteer Board of DirectorsControlled by shareholders and paid officialsMember-service drivenProfit-drivenFederally insured by the National Credit Union Administration or a private insurer.Are federally insured by the FDICCan serve only those people within their field of membership.Can serve anyone in the general public. Banks and credit unions may differ on cost, convenience, customer service, financial products, and online banking. Whether you decide to open an account with a bank or credit union depends on your needs and what you value most.Take the time to research your options and identify what benefits matter most to you. This will allow you to decide which the best choice is when it comes to handling your banking needs.To locate a FDIC-insured institution you can use the Bank Find locator on the FDIC.gov website.To find a local credit union you can utilize the NCUA’s credit union locator. [http://www.ncua.gov/NCUAMapping/Pages/NCUAGOVMapping.aspx]Marco Carbajo is CEO of the Business Credit Insiders Circle (http://www.businesscreditblogger.com), a step-by-step business credit building system providing lines of credit, business credit cards, trade credit, and funding sources.

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Marco Carbajo is CEO of the Business Credit Insiders Circle (www.businesscreditblogger.com), a step-by-step business credit building system providing lines of credit, trade credit and funding sources.