While banks and credit unions are both financial institutions where you can keep, borrow, and grow your money, they are not exactly the same. Here is a chart breaking down the main differences between them:
|– Banks are for-profit financial institutions. Their primary focus is making money for their stakeholders.|
– No membership requirements. Virtually anyone without a really risky history can open an account.
– Insured by the US government through the Federal Deposit Insurance Corporation (FDIC).
– Because they are profit-oriented, typically have lower rates on savings products and higher rates on loans.
– Primary benefits include comparatively better technology (like apps) and more branch/ATM locations.
|– Credit unions are nonprofit financial institutions. Their primary focus is serving their owner-members.|
– Membership requirements, such as need to live and/or work in the area or part of a specific group.
– Insured by the US government through the National Credit Union Administration (NCUA).
– Because they are member-focused, often have higher rates on savings products and lower rates on loans.
– Primary benefits include more personal/local customer care services and financial literacy resources.
Online banking refers to any account activity done electronically via a computer or mobile device. While traditional banks and credit unions often have an online banking option, FDIC-insured online-only banks only provide digital services. Because they have no physical locations, they save money and may offer competitive interest rates and low fees.
With all these options available, there is a great chance you can find a financial institution (or two) that best meets your unique needs. Here are some guiding questions to ask yourself in order to determine the best fit for your and your family:
Mainstream banks offer the broadest range of services, while credit unions have similar (if slightly less expansive) capacities. Online-only banks have the fewest services but often offer great interest rates.
For people comfortable with mobile apps, online-only banking is a great option. However, if you like being able to meet in person, a bank or credit union that also offers online banking might be a better choice.
If you make frequent cash deposits or withdrawals, a bank or credit union with convenient branch and ATM locations is preferable because online-only banks may not readily provide this service.
While each individual institution is different, typically banks impose more frequent and higher fees than credit unions. Therefore, it is important to do your research and make sure you understand the interest and fees imposed by each.
Moreover, if after reviewing these questions, you decide to move entirely to a new institution or even keep your current one and open an account elsewhere, follow these guidelines for how to switch banks or credit unions.
FAIR Financial is an affordable option because their products are designed to help people achieve financial health and wealth, including:
Finally, if you’re interested in FAIR, please send us an email at [email protected] or call 612-615-0067 ext. 1.
Money Management E-Newsletter: June 2021