When it comes to finding somewhere to keep your money, there is no shortage of options. However, the similarities found between bank vs credit union may confuse you about which option is best suited to you.
On the one hand, both institutions will let you deposit and take out a loan for various uses; however, there are differences between the two.
We all know what a bank is and how it functions, but what is a credit union?
In this article, we’ll explore three key differences between banks and credit unions.
1. Bank vs Credit Union Operations
Banks and credit unions both make their money by lending money with interest and through fees. The major difference between a bank and a credit union in terms of the way that they operate is that credit unions are not-for-profit organizations.
Credit unions are controlled by their customers, who are referred to as ‘members.’ A credit union will set out to return any profits to its members.
Banks, on the other hand, are controlled by shareholders. The primary objective of a bank is to increase the profits for the shareholders.
2. Credit Union vs Bank Eligibility
When it comes to eligibility, banks are open to a wider variety of people. In comparison to this, credit unions limit membership.
That said, it is quite easy to meet the requirements of a credit union, which may have eligibility requirements based on where you live or work or whether you a member of a particular organization.
3. Bank vs Credit Union Financial Products
For the most part, banks’ and credit unions’ types of products are almost the same. Most credit unions and banks offer a range of the following financial products:
- Checking accounts
- Savings accounts
- Business accounts
- Mortgages
- Loans
- Online banking
So, what’s the difference between credit union vs bank loan? Banks are more likely to offer specialized products such as student loans.
When weighing up your credit union options, it is important to consider the interest rates and fees and see how these differ from those found in banks.
In general, credit unions tend to provide more favorable rates and fees. This is because credit unions are focused on increasing profits for members rather than for investors.
Not only this, but their not-for-profit status makes them exempt from some of the taxes that a bank must pay.
This tax exemption means that credit unions tend to offer better interest rates on savings and certificates of deposits and lower interest on loans.
Which Will You Choose?
When comparing bank vs credit union, it is often the credit union that fares better.
While there may be eligibility criteria that you will need to be able to meet before you can join a credit union, and they may not offer the full range of products offered by banks, credit unions are worth considering.
Fees and rates will differ between credit unions, and it is always best to shop around for the best deals.
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