Credit Unions vs. Banks: Which is Better for You?
A bank and federal credit union are financial institutions that hold cash and offer typical banking services. When looking to open a savings or checking account or avail of a loan, you have more options than the countless local and national banks. A credit union is an often-overlooked option.
Banks and credit unions offer the same services. Thus, it can be difficult to tell them apart and even more challenging to know which is better for your banking needs. However, if you look closer, you will discover a few things that make these financial institutions different.
Understanding the difference between a bank and a federal credit union can help you choose which is better for you.
What is a Credit Union?
A credit union is a member-owned non-profit financial institution. Credit unions can either be chartered by the state or federal government.
A state regulates a state-chartered credit union, whereas a federal credit union is by the National Credit Union Association (NCUA). Deposits made at a state-chartered credit union are privately or federally insured, while the NCUA insures deposits at a federally-chartered credit union.
A credit union requires membership based on where you live, worship, work, or your associations (such as a labor union, college, or university). If you want to be a member of a credit union in New Jersey, you need to qualify for any of these conditions in the state.
Members own the credit union and vote for volunteers on its board of directors. Membership in a credit union typically requires a one-time fee and a deposit fund.
The profit of a credit union goes back to members through higher interest rates on savings, better loan interest rates, and educational programs.
What is a Bank?
A bank is a financial institution licensed to hold deposits and lend money. The Federal Reserve, Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation regulate banks.
A bank is a profit-based organization categorized into retail banks, commercial banks, investment banks, and central banks. Each type of bank has a definite role within the financial system.
Banks use the money in their customers’ savings and checking accounts to extend loans to individuals and businesses. They give a portion of their profits (loan interest rates) as interest in savings accounts.
Comparing Credit Union and Banking Services
Knowing the differences between credit unions and banks is crucial to determine which option is better for you.
Membership and Ownership
Members own credit unions, and they have membership criteria and fees. Customers have voting rights to elect a board of directors.
Banks have open membership. Private investors own them. Anyone who meets their account opening requirements can become a customer. Customers do not own the bank and have no voting rights or privileges.
Products and Services
Credit unions have various financial products, including savings and checking accounts, loans, and credit cards. They may, however, have fewer financial products than banks.
Banks offer a wider range of financial products and services, including insurance products, investment options, and specialized accounts.
Fees and Costs
Credit unions have lower account fees and interest rates on loans. They have competitive interest rates on savings accounts and certificates of deposit.
Banks usually have higher savings account interest rates, transaction fees, and loan interest rates.
Credit unions offer more personalized service because they focus on the community. Because of the cooperative structure of credit unions, members have closer relationships with the staff and decision-makers.
Different banks offer different levels of customer service. Smaller banks may offer more personalized services than larger banks.
Credit unions have varying levels of technology. Greater Alliance Federal Union offers digital banking.
Banks invest heavily in technology and have more extensive ATM networks.
The National Credit Union Administration (NCUA) insures credit union deposit accounts.
The Federal Deposit Insurance Corporation (FDIC) insures deposit accounts in banks.
A federal credit union is deeply involved in the community it serves, prioritizing corporate social responsibility and community activities.
At the end of the day, the choice between a federal credit union and a bank depends on your preferences, specific needs, and services of each financial institution.
Why is a Credit Union Better?
Credit unions offer some perks banks can seldom match, making them a better option.
- Easy to join and open an account
- Fewer to no account fees
- Higher interest rates on deposit accounts
- Lower interest rates on loans
- Personalized customer service
Greater Alliance Federal Credit Union is one of the best federal credit unions in New Jersey, offering these financial services:
You can open any of these accounts by visiting the GAFCU branches or via digital banking.
- Personal Savings Accounts
- Business Accounts
- Digital banking
Opening a personal savings account with GAFCU is a breeze. You must only qualify for the eligibility requirements, present a valid government-issued ID, and have a minimal deposit. You can also opt for a Club Savings Account, Retirement Savings Account, Certificate Account, or Kids Account. You can also opt for a Savings or Checking Business Account.
- Personal cash loans
GAFCU offers personal loans, fast cash loans, and secured loans with competitive rates and flexible terms.
- Auto loans
GAFCU offers the fastest way of applying for a new or used car loan.
GAFCU offers fixed and adjustable rate mortgages, FHA mortgages, and mortgage refinancing.
- Home equity
GAFCU offers house loans such as home equity loans and home equity lines of credit.
- Student loans
Students can help pay for their educational expenses via student loans.
- Business loans
GAFCU offers business loans such as Business Lines of Credit to help grow your business.
- Personal cash loans
GAFCU, a non-profit organization, was founded in 1937, servicing Bergen and Passaic Counties, New Jersey. When you open an account with GAFCU, you become a part owner of this financial alliance.
Choosing a better financial institution –credit unions or banks depends on your needs.
While banks offer more financial services, a federal credit union provides higher interest rates on deposit accounts and lower interest rates on loans. Many credit unions are at par with technological advancement because most have digital banking.