Credit Unions Vs. Banks: How To Determine Which One Is Best For You
Author: Marco Carbajo
Selecting which type of financial institution to handle your personal or business banking account largely depends on your financial needs and personal self interests.
Banks offer a wide range of services, and are more accessible to customers on a larger scale. For example, if you have an account with a branch of Chase in Michigan, you can access that same account at any Chase branch and ATM's in Texas. This makes it easy if you are a frequent traveler.
With a credit union you have limited ATM access all across the country. Credit Unions typically have a limited number of branches, making it difficult if you need this type of access.
Banks are for-profit financial institutions, owned by shareholders, not customers of the bank. Their primary goal is to generate profits which they return to shareholders in the form of dividends.
In comparison, credit unions are member-owned and member operated. A credit union is a collaborative, not-for-profit financial institution formed to supply credit to its members who are also its customers.
Another factor to consider is what type of fees banks and credit unions charge to manage your accounts. With over 50 fees that a typical bank can charge customers it is essential to identify the fees each financial institution will impose when opening an account.
Just recently banks have been scrambling to replace billions of dollars in revenue that will be lost due to the new federal regulations on overdraft charges and debit cards.
For example, banks generate substantial revenues from interchange fees they charge to retailers for debit transactions. These fees are something that customers never really paid attention to because the fees were imposed on the retailer.
But with the new regulations, the fees most banks can charge retailers will be cut from 44 cents to a cap of only 24 cents.
As a result banks will lose billions of dollars in revenues every time a customer swipes a card. Banks will therefore focus on ways to recapture that lost revenue in order to satisfy its shareholders.
With a credit union, this is not an issue because a credit union's priority is to serve the needs of their members rather than to make a profit for shareholders. Because of this focus a credit union is able to keep interest rates on deposits higher and loan rates and fees lower.
Here's a quick comparison of the key differences between credit unions and banks:
Credit Unions
*Not-for-profit
*Returns profits to members with lower loan rates, higher savings rates, and free or low-cost services
*Each depositor is a member with shares of ownership
*Members elect a volunteer Board of Directors
*Member-service driven business culture
*Federally insured by the National Credit Union Administration or a private insurer
*Can serve only those people within their field of membership (which is often very broad)
Banks
*Profit-oriented
*Returns profits to shareholders
*Customers have no ownership in the corporation
*Controlled by shareholders and paid officials
*Also federally insured by the FDIC
*Can serve anyone in the general public
Banks and credit unions may differ on cost, convenience, customer service, financial products, and online banking. Whether you decide to open an account with a bank or credit union depends on your needs and what you value most.
Take the time to research your options and identify what benefits matter most to you. This will allow you to decide which the best choice is when it comes to handling your banking needs.
To locate a FDIC- insured institution you can use the Bank Find locator on the FDIC.gov web site.
To find a local credit union you can utilize the NAFCU's credit union locator.
------
About the Author
Marco Carbajo is founder of the Business Credit Insiders Circle. For more information on Credit Unions vs. Banks visit Marco on Twitter @MarcoCarbajo and visit his blog on business credit building.
Banks offer a wide range of services, and are more accessible to customers on a larger scale. For example, if you have an account with a branch of Chase in Michigan, you can access that same account at any Chase branch and ATM's in Texas. This makes it easy if you are a frequent traveler.
With a credit union you have limited ATM access all across the country. Credit Unions typically have a limited number of branches, making it difficult if you need this type of access.
Banks are for-profit financial institutions, owned by shareholders, not customers of the bank. Their primary goal is to generate profits which they return to shareholders in the form of dividends.
In comparison, credit unions are member-owned and member operated. A credit union is a collaborative, not-for-profit financial institution formed to supply credit to its members who are also its customers.
Another factor to consider is what type of fees banks and credit unions charge to manage your accounts. With over 50 fees that a typical bank can charge customers it is essential to identify the fees each financial institution will impose when opening an account.
Just recently banks have been scrambling to replace billions of dollars in revenue that will be lost due to the new federal regulations on overdraft charges and debit cards.
For example, banks generate substantial revenues from interchange fees they charge to retailers for debit transactions. These fees are something that customers never really paid attention to because the fees were imposed on the retailer.
But with the new regulations, the fees most banks can charge retailers will be cut from 44 cents to a cap of only 24 cents.
As a result banks will lose billions of dollars in revenues every time a customer swipes a card. Banks will therefore focus on ways to recapture that lost revenue in order to satisfy its shareholders.
With a credit union, this is not an issue because a credit union's priority is to serve the needs of their members rather than to make a profit for shareholders. Because of this focus a credit union is able to keep interest rates on deposits higher and loan rates and fees lower.
Here's a quick comparison of the key differences between credit unions and banks:
Credit Unions
*Not-for-profit
*Returns profits to members with lower loan rates, higher savings rates, and free or low-cost services
*Each depositor is a member with shares of ownership
*Members elect a volunteer Board of Directors
*Member-service driven business culture
*Federally insured by the National Credit Union Administration or a private insurer
*Can serve only those people within their field of membership (which is often very broad)
Banks
*Profit-oriented
*Returns profits to shareholders
*Customers have no ownership in the corporation
*Controlled by shareholders and paid officials
*Also federally insured by the FDIC
*Can serve anyone in the general public
Banks and credit unions may differ on cost, convenience, customer service, financial products, and online banking. Whether you decide to open an account with a bank or credit union depends on your needs and what you value most.
Take the time to research your options and identify what benefits matter most to you. This will allow you to decide which the best choice is when it comes to handling your banking needs.
To locate a FDIC- insured institution you can use the Bank Find locator on the FDIC.gov web site.
To find a local credit union you can utilize the NAFCU's credit union locator.
------
About the Author
Marco Carbajo is founder of the Business Credit Insiders Circle. For more information on Credit Unions vs. Banks visit Marco on Twitter @MarcoCarbajo and visit his blog on business credit building.
Article Source: http://www.articlealley.com/http://marcocarbajo.articlealley.com/credit-unions-vs-banks-how-to-determine-which-one-is-best-for-you-2408218.html
Tags:
profits,
banks,
chase,
frequent traveler,
dividends,
billions of dollars,
debit cards,
financial institution,
financial institutions,
shareholders,
credit unions,
atm,
banking account,
overdraft charges,
business banking,
typical bank
Posts
No comments:
Post a Comment