This article describes in detail about the various benefits of the credit unions and the banks and the differences between the same.
Credit Union:
The credit unions are cooperative financial institutions that operate in a non-profit way. The unions are owned by the members itself instead of stockholders, and unlike banks, profit gained will be distributed to the members instead of the stockholders.
The following are the advantages and disadvantages of a credit union.
Advantages:
- Personalized services and good customer service – As the model doesn’t have a stockholder, you become a member-owner of the union. So every member-owner is treated well.
- The low-interest rate on loans and good interest rate for savings – As it doesn’t follow the profit model, unions are aimed at providing more profit to the member.
The fee collective by the unions would be used to cover only the operative costs and not for making the profit.
- Fund protection through National Credit Union Administration – The government-backed NCUA insures the funds credited in the unions.
Disadvantages:
- Membership requirements
- Difficult to locate branches
- Fewer options on credit and savings account when comparing to bank
- Lack of technological advancements
Banks:
In contrary to the credit unions, banks always operate for stockholders with profit being the sole aim. They provide a variety of services to the customers such as online banking, retirement benefits, financial planning, and so on.
The following are the advantages and disadvantages of a bank:
Advantages:
- An extensive network of branches and ATMs
- Technologically advanced services that are aimed at reducing the burden for customers in coming to branches for every task
- Minimal membership requirements
- Multiple rewards programs
Disadvantages:
- The high-interest rate for loans
- The low-interest rate for savings
- High service fees
- Lack of personal touch
other valuable tips:
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How to choose between a credit union and a bank?
There is no clear winner in this aspect. If you are a person who doesn’t want to visit a branch to do your work and prefer to have it done all by yourself over the internet, and if you would be OK with the excessive charges levied, then bank would work for you well.
If you are a person who doesn’t bother much about flexibility but want a better rate for your savings and loans, then credit unions would work well for you.
One advantage with a credit union is you will find a way to get a loan for the mortgage even if you have a bad (or a lower) credit score. The credit unions allow you to explain face-face the terms that will help you to get a loan.
In our view, a bank and credit unions can be used together to avail the services of both. You don’t need to quit one to join another.
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