5 Differences Between Credit Unions And Banks
Credit unions and banks are both entities made for people to manage their finances and carry out daily transactions, and there are various options for both credit unions and banks available in the market. To understand the main differences between the two, let us start by looking at the basic differences.
- Credit Unions
A credit union is a non-profit co-operative organization owned by its account holders, as opposed to a bank.
Banks are government organizations or owned privately and are for-profit organizations. They help run and organize the economy of the country.
Both financial institutions are beneficial in their own way. Here are some more differences between the two which will help you make a more informed decision as to which one to choose.
- Profit and Not-for-profit
One of the main differences that separated a credit union and a bank is their nature of profits. A bank basically concentrates on churning out profits through its stakeholders whereas a credit union is a not-for-profit organization. A bank is run by its stakeholders, whereas a co-operative is run by a community of people. - Difference in rates and fees
Since credit unions are not regulated by the Federal Reserve, they are in a position to offer better savings and rates. A credit union or even a small bank for that matter is in a position to provide you lower interest rates as well as higher fees. The maintenance for a credit union is a little more difficult but it is made for people by the people, hence the lower interest rates and much higher fees. A bank, on the other hand, provides you lower fees since they have a lot of accounts and the interest rates are higher to keep the customers with them.
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- Difference in the insured amount of bank accounts
The Federal Deposit Insurance Corporation has a difference in the insurance it provides for bank accounts as well as credit unions. When it comes to a deposit insurance, it is around $250,000 per account for a credit union. NCUA on the other hand insures up to $250,000 per account when it comes to bank accounts. The main difference is the authorities who grant these insurances. - Technologically advanced
One of the biggest advantages of a bank account is the technological innovations that are available to make the transactions smooth. Whereas, when it comes to credit unions, the pace of innovation is slow. Things like updates in net banking, faster transactions are what make a bank preferable as compared to a credit union. - Easy customer service and accessibility
When it comes to ATMs and branches, a bank is more frequently present as compared to a credit union. Since more of these are present, they are also more easily accessible. Credit unions have branches and ATMs, but they are not as frequently present. Unless you are in one of the main local areas, it will get difficult for you to reach them in case of any problem.
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