Both individuals and businesses use financial institutions to meet a variety of their financial needs. When looking to use a financial institution, the two most common types available are banks and credit unions. Both of these entities provide consumers and businesses with a number of things such as accounts, loans and customer service. However, both financial institutions have their differences and therefore it is important for both consumers and businesses to be aware of them.
One of the main differences between banks and credit unions is that banks are for profit institutions while credit unions non-profit organizations. Banks usually have shareholders and investors who are looking to receive profits from the financial institution. As a result, they are more focused on maximizing revenue rather than accommodating customers.
Credit unions, on the other hand, are non-profit which don’t have the motivation to increase profits for investors and shareholders. As a result, they are more focused on providing perks to customers. These include free credit union checking account. They also include things such as less rigid qualification criteria for loans and also higher rates of return on savings accounts.
Banks have varying interest rates on the loans that they offer. When issuing mortgages, banks will offer rates that are normal for a given market. They also depend on the size of the bank. Larger banks will charge slightly higher rates than smaller banks. The interest rates offered by banks are usually lower than credit unions.
With credit unions, you will usually have to pay a higher rate than what banks charge. As a result, a mortgage and a car loan will usually cost a little more when using a credit union.
When it comes to fees, banks usually charge ones that are higher than that of credit unions. They will often have fees for checking accounts as well as making certain transactions. Therefore, consumers will need to keep the fees in mind when opening up an account with a bank.
Credit unions offer fees that are usually lower than that of banks. As a result, they can save consumers a lot of money when looking to provide them with a checking or savings account. At times you can even get a free credit union checking account with no fees.
Another thing to consider when using a bank or a credit union is the rate of return on certificates of deposit and savings accounts. Banks will usually have lower rates of return on these things. Therefore, consumers will benefit by looking into other institutions if they are looking to maximize the return on their savings.
With credit unions, the rates of return are higher on savings and money market accounts. You will likely earn at least 1% more on a savings account and a certificate of the deposit than a bank. This will help consumers increase their savings and earn more money from investing in a CD or money market account.
Both banks and credit unions provide individuals and businesses with a dependable institution to manage their money. While both institutions offer many benefits, they also have differences that are quite significant. Whenever you are looking to use a bank or a credit union, it is important to consider factors such as interest rates, fees, accounts and rates of return on savings accounts.
Anyone looking to take advantage of lower fees, higher rates of return and a more customer-driven institution, credit unions are the ideal options. However, if the consumer is looking for lower interest rates on loans then a bank is an ideal option.
