According to the Federal Deposit Insurance Corporation, 95% of United States households have ties to a bank account. Most people know that banks provide them with a safe and (relatively) stable place to store their money.
However, that statistic also factors in people who have accounts open at credit unions. These institutions are less well known—most people have heard of them, but they don’t know how they’re different.
To help you understand whether you should store your money in a bank or credit union, we’ve put together this guide. By the time you finish reading it, you’ll know exactly which option is right for you.
Keep reading for a guide that will fill you in on the differences and benefits of a bank and a credit union.
What Is a Bank?
As you probably know, banks are financial institutions where most people store their money.
Banks are unique in that they lend out the money that people deposit into them. This helps people do things like buy homes, afford cars, and send their children to school. While they do this, the banks themselves make a profit.
Some of the most popular banks include Chase Bank, Bank of America, and Wells Fargo. These banks have hundreds or even thousands of branches across the United States and the world.
Benefits of a Bank
Banks provide people with several different benefits. We’ll touch on how banks and credit unions are different down below, but let’s take a look at what makes banks the better choice for some.
If you’re someone who likes staying up to date with the latest technology, you might be better off opening a bank account instead of one at a credit union.
Larger banks like the ones mentioned understand that younger bankers want to use financial technology. Because of that, they invest money into making their banking experience easier.
Working with a bank like Farmers Bank gives you access to financial technology that smaller credit unions don’t often have the budget for.
More Branches and ATMs
Another advantage of bigger banks is that they have far more branches and ATMs around the country. Banks make it easier to access your money and also help you avoid paying expensive withdrawal fees.
This contrasts with credit unions, which are often much more localized and regional.
Given their smaller, more local status, credit unions can often be restrictive. If you don’t live in a specific area or belong to a certain group, you might not be able to open an account.
On the other hand, banks are open to anyone who can walk in and provide a form of identification.
What Is a Credit Union?
In many ways, credits operate similarly to banks. They’re another type of financial institution where people can deposit and withdraw money. Both also have security nets in place that protect your money.
However, ordinary members own a credit union, while investors own a bank. This gives credit union members the power to make decisions regarding leadership and other areas.
As mentioned, credit unions are also non-profit, which means that they don’t have to pay taxes. Many use this excess money to provide better financial products for their members.
Benefits of a Credit Union
As you might guess, this sort of setup provides members with some unique benefits.
Here are three of the biggest ones.
Shareholders own banks, which means that despite being places where you can store your money, banks are always trying to make a profit. Because of that, it can be hard to find good loan products at a bank.
Credit unions are member-owned, so they don’t suffer from this problem. In many cases, this allows you to get a better deal.
As banks use your money to conduct transactions and turn a profit, they encourage members to have specific amounts of money in their accounts.
Credit unions do this far less, having much lower overdraft fees and minimum balance requirements. If you’re someone who doesn’t always have a consistent amount of money in their account, a credit union could be the better choice for you.
Better Interest Rates
Not having to answer to shareholders also means that credit union members enjoy better interest rates than people who go to a bank.
You earn more from the money you have in savings and pay less for loans and other things.
Which Is the Right Choice?
So, while banks and credit unions both do the same thing, they exist to serve different purposes. If you don’t like the idea of shareholders using your money to generate huge profits, choose a credit union instead of a bank.
Working with a credit union is also the right choice for people who want the best deal. You won’t have to worry about unfavorable fees and rates.
However, many people want their banking experience to be as convenient as possible. In that case, working with a bank might be the right choice. Banks are more accessible, less restrictive, and use the latest tech.
All of that makes your life easier!
Bank or Credit Union? That Depends on You
If you’re looking for a safe place to store your money, don’t store your money under your mattress to keep it safe. Instead, look into opening an account at a bank or credit union.
As this guide explains, there are different benefits of each. In the end, the right choice is the one that works best for you and your lifestyle.
Are you on the hunt for more finance-related guides and tips? If you are, spend some time checking out the rest of our site.