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Banks and Credit Unions: Which Are Right for Your Needs?
Moving into a new apartment might also mean a move for your money. One question is whether you wish to keep your money in a bank or a credit union. Here’s some information about credit unions and how to compare them to banks.
A credit union works a little differently than a bank. Credit unions are designed to be “financial cooperatives” where anyone who holds money in the credit union is allowed a vote. As such, many credit unions limit their membership to members of various groups. For instance, one credit union may serve the employees of a large company or organization, while another may offer its services to people who live in a certain geographic location. If you’re a college student, there may be a credit union on campus open only to faculty, staff, and students. As a rule of thumb, the more specialized the credit union, the more it limits membership, the smaller it will be overall, and the fewer branches it will have.
While bank deposits are insured by the Federal Deposit Insurance Corporation (FDIC), credit unions are insured by the National Credit Union Share Insurance Fund. Thus, depositing money with a credit union (up to $250,000) is no riskier than depositing it with a bank. If you’re worried about the relative health of a particular credit union or bank, you can get data on bank assets through the FDIC or get credit union profiles through the National Credit Union Administration (NCUA).
So what should you be thinking about when comparing banks versus credit unions? Here are a few differences:
- Rates. Banks and credit unions may pay different rates on savings accounts, certificates of deposit (CDs), and loans. (You can compare rates at Bankrate.com.)
- ATM and branch locations. The largest and best-known banks offer more convenience with a large network of branches and ATMs. A smaller bank or a credit union might limit your options for getting at your money without a fee, though they might belong to a network such as STAR or CO-OP which provides access to a broader number of ATMs.
- Incentive programs. Some of the larger banks have the flexibility to try new savings programs, such as Bank of America’s Add It Up cash-back program. Credit unions, with smaller budgets, may have to stick to more traditional offerings. But many credit unions do offer financial counseling.
- Customer service. If you want a financial institution with a small staff that knows your name, you’re more likely to find it at a smaller credit union. Credit unions also generally have a reputation for being less likely to charge hidden fees, although customer-service levels can vary widely among credit unions.
- Online banking. Larger banks are generally able to put more focus on their Web site interfaces and are more likely to be serviced by money-management programs, such as Quicken. If you prefer to bank online, you may find better service with a larger banking institution.
In general, if you want more convenience, online and off, you’ll probably want the larger reach of a big bank. If you don’t mind having access to fewer ATMs and you like the idea of a financial institution where the customers are also the shareholders, choose a credit union.
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