If you have been following our previous posts which we believe you have, then you know that credit unions are similar to banks, however just smaller and mostly community based. Here, we take a look at 5 of the main differences between the two.
#1 The interest rate levels differ
Credit unions are purposefully established for the benefit of members therefore their structure when it comes to interest rates has to favor the members. This therefore means that interest rates will be much lower in comparison to banks which are mainly profit making institutions hence they are purposefully meant to serve the best interests of the shareholders.Banks typically charge interest rates that are between 4 and 10 times higher than what you would pay in a credit union. However, when it comes to online banks, they are believed to offer more competitive rates when compared to credit unions.
#2 The loan and credit card rates differ
As we have established, credit unions generally offer similar products in the finance sector as compared to banks albeit at cheaper rates.If you are looking to take a car loan, a mortgage, a personal loan or a credit card then your credit union will offer you a better deal in comparison to your bank. Their percentage points on these products are at least two points lower.
#3 Their fees differ
Credit unions are known to have fewer fees when compared with national banks. As a matter of fact, most credit unions will not charge any fees for withdrawals, checks or electronic transactions. In addition, most accounts whether checking or savings will not require an account servicing charge or even a minimum operating balance. However, when it comes to banks, these costs are all inclusive and may increase your bank transactions by hundreds of dollars.
#4 Their loyalties to the customer differ
As we have established, banks are primarily business ventures with a loyalty to shareholders. This means that they are led by a desire to maximize profit therefore, services extended to the customers tend to be higher. Credit unions on the other hand are non-profit ventures established for the benefit of the members hence their loyalties are first to its members. This means that services will often be customer friendly.
#5 The quality of services differ
Because of the small size of credit unions and the fact that they are community based financial institutions, the services they offer tend to be more personalized. In most cases, tellers will get to know their customers by name, therefore treating them as though they are dealing with a friend. Banks on the other hand serve millions of customers therefore the probability that a teller will recognize you is minimal. In fact, most banks have introduced ATMs as a way of limiting interaction between the banks and is customers.
It is therefore safe to conclude that credit unions are much better than banks. You ought to check them out.