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Banks and credit unions have many similarities and differences that must be considered. Both offer the same general services, such as checking and savings accounts, as well as many loan options. Deposits in your credit union and bank accounts are federally insured up to $250,000 per account per account holder.
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However, you will find differences in prices, interests, product offerings, convenience and customer service, even though everyone’s financial intuition is different. Credit unions offer lower rates and fees and more personal customer service. However, banks may offer many loans and other financial products and may have extensive networks that can make banking more convenient.
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Commercial banks or citizen banks can be investor-owned or private. Banks operate as profit-seeking companies. Anyone can open a bank account, while credit unions have membership requirements.
There are 4,026 FDIC-insured commercial banks with approximately $22.5 trillion in assets as of December 31, 2023. Banks can vary from local single-branch banks to large regional banks and country-specific banks.
Commercial banks often offer a variety of banking products to consumers and businesses, including checking or savings accounts, personal loans, auto loans, or loans. Banks may offer investment and savings vehicles such as Individual Retirement Accounts (IRAs), Certificates of Deposits (CDs), and Money Market Accounts.
Banks must pay federal income tax on their earnings, unlike credit unions, which are exempt from paying income tax.
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Bank deposits are federally insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC), so your money is safe in case the bank fails.
Credit unions are non-profit financial institutions owned by their members. They offer many of the same products and services as banks, including checking and savings accounts, as well as many loan products and investment accounts such as IRAs.
Deposits in credit union accounts, like banks, are federally insured up to $250,000, but they are insured by the National Credit Union Administration (NCUA) instead of the FDIC.
By 2024, more than 140 million people will belong to a credit union. Members of the credit union can vote on the policies of the credit union and participate in decision-making. According to NCUA’s 2022 Annual Report (New Report), the 4,760 federally insured credit unions have approximately $2 trillion in assets.
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Credit unions must limit their customer base to an “NCUA-approved member area,” such as a workplace, school, place of worship, or community area. National credit unions want to increase membership, so they may offer broader membership areas, such as accepting members from a specific organization, large company, or a wider geographic area.
The credit union rewards members with benefits such as lower fees and better interest rates. CUNA estimates that the financial benefits offered to credit union members are $156 per member or $328 per family member.
Credit unions were originally developed to provide limited banking services for modest incomes in a narrow social circle. As a result, credit unions are exempt from federal income tax.
Due to long-term regulations, credit unions face greater restrictions than banks, especially in investment, lending and commercial banking.
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Costs can play an important role in choosing a financial institution. Credit unions usually charge lower fees than banks.
Another study published in 2021 by the Consumer Financial Protection Bureau found that credit unions have low rates of delinquency and non-sufficient funds (NSF).
However, businesses may charge dozens of fees, including monthly account management fees, ATM fees, foreign transaction fees, debit card switching fees, and other fees. Carefully check all expenses that are important to you. You may find a small cash or cash account at a bank or credit union.
While in-person access may not be as important as it once was, many people still want the convenience of a branch and access to an ATM. If you regularly visit a brick-and-mortar branch for consumer or business services, carefully consider the financial institution’s branch network.
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Banks receive higher customer satisfaction scores for the number and location of ATMs and branches compared to credit unions, according to the American Customer Satisfaction Index Survey. National banks are at the top of customer satisfaction with the highest scores in the number and location of ATMs and branches.
In general, credit unions have fewer branches than banks. For example, the country’s largest bank – Chase – has more than 4,700 branches.
To compensate for this deficiency, the credit unions have established a CO-OP network of joint branches with more than 30,000 ATMs and 5,000 joint branches across the country. In distributed units, members can perform many tasks individually.
According to the 2023 net comparison, credit unions tend to offer higher returns than certificates of deposit and money market accounts. However, banks offer a higher average rate of return for current and savings accounts in the same year.
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Credit unions have offered more competitive interest rates for loans in 2023 and charged lower interest rates than banks for the following reasons:
In some cases, the differences in prices are small. However, credit companies usually offer lower rates, especially for credit cards and car loans.
Credit unions also can’t charge more than 18% interest on consumer loans, except for short-term loans that compete with payday loans, which can have interest rates as high as 28%.
Although customer service is often considered more of a union benefit, the 2024 American Customer Satisfaction Index survey shows that banks are generally slightly stronger in this area.
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However, the difference is almost non-existent, as both credit unions and banks provide the same numbers in many categories, such as the friendliness and helpfulness of bank tellers or other staff and the speed of money transfers in the category. Local and regional banks have better ratings for customer service.
ASCI users rate credit unions slightly lower for many financial services available, including checking, savings, debit/credit cards and loans. Banks achieve better results in this regard.
For example, many large national banks offer international banking services and products for frequent travelers or people living abroad. While some credit unions may offer these services and products, it is not uncommon.
When we compare credit cards, national banks dominate our list of best credit cards. Credit union cards focus more on offering lower interest rates on rewards and benefits.
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Customers give banks a slightly higher rating for satisfaction with websites and the quality and reliability of mobile applications in the ACSI 2024 survey; however, as in many categories, the differences in scores were negligible.
You can also find great digital banking options at many national credit unions. Learn about mobile banking technology and explore the convenience and services of the website.
Deposits in bank and credit union accounts are federally insured up to $250,000. If you have more than $250,000 deposited in a bank or credit union, consider saving the balance at another financial institution.
Credit unions often offer lower mortgage closing costs and lower interest rates, especially on credit card and car loan rates. They also have lower fees and higher savings for CDs and money market accounts. Finally, credit union members can vote on the financial institution’s policies and decisions.
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Most credit unions cannot compete with banks in terms of the number and type of products that the big banks offer. However, this may not be a problem for those looking for simple savings products.
Credit unions can be ideal for low interest loans, low mortgage closing costs or reduced payments, but you must apply for membership. The big banks can offer you more choice in products, services and international or commercial products and services, and anyone can join.
Local and smaller regional banks can offer you more customer service for your money if that’s important to you. Weigh the pros and cons of each financial institution to determine which one best suits your needs.
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The best credit union for your small business is one that gives you a safe place to keep and grow your money.
Some small business owners may not realize the benefits of opening an account with a credit union instead of a regular bank.
Here’s how credit unions differ from banks, what they can offer, and how they can meet the needs of small businesses.
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The credit union is a financial cooperative of its members. When you apply to join a credit union, you effectively become a member. Credit companies are established as non-profit organizations. Members elect a committee that appoints directors to lead
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