By Sabrina Karl
When shopping around for a top-rate savings account or CD, you’ll likely encounter several credit union options. If you’ve never banked with a credit union before, you might be wondering what the difference is between these institutions and traditional banks.
In short, banks are for-profit institutions that must satisfy their shareholders, while credit unions are not-for-profit with a focus on their member customers. And while almost anyone can open an account with a bank, only customers meeting certain geographic, employer, or other affiliation criteria can join most credit unions.
As a result of their profit status, banks tend to have higher fees and lower interest rates on savings. They may also charge more on loan and credit products. But their strong profit-making ability means they generally offer more products, branches, and ATMs, as well as better online and mobile options.
At a credit union, you may find better savings rates, lower fees, or lower-interest loans, as well as possibly stronger customer service. However, many credit unions offer less branch and ATM accessibility, and many have less customer-friendly mobile sites and apps.
You’ll also need to become a credit union member to be a customer. Each credit union defines a “field of membership” to indicate its affiliation or residency requirements. However, some credit unions accept members nationwide through a very broad member definition.
As for safety, the institutions are equivalent. Whereas your deposits at a bank are federally insured up to $250,000 by the FDIC, credit unions carry the same level of insurance from the NCUA.
For the highest convenience, broadest accessibility, and latest technology, banks will suit some consumers better, but at the cost of potentially higher fees and lower earnings. But for those wanting a top deposit rate or enhanced customer service, a credit union may be the winning bet.