What Makes a Credit Union Different?

It's important to store your money in a place where it will be safest and have the greatest potential to grow. That's why you may one day need to choose between opening up an account in a credit union or bank.

You will want to make sure you learn the difference between banks and credit unions to ensure that you can make the right choice for you.

Credit Unions vs Banks

Banks and credit unions have some similar features. For example, your money has the same FDIC protection in a credit union that it does in a bank, and in most cases, the amount of coverage is up to $250,000.

The most significant difference between a bank and a credit union is ownership. Banks are owned by shareholders and are considered for-profit businesses, and credit unions are not-for-profit organizations owned partially by each share account holder. This means that you will be a partial owner of any credit union you open an account with.

For-profit organizations tend to focus on making money, while not-for--profit organizations focus more on providing the services their members need. Credit unions tend to offer many more services that help their members and partial owners balance their lives and improve their life quality. Credit unions offer some of the same account types, like checking and savings accounts, and some of them also provide loans, credit cards, investment options, and additional services.

As for membership, it's a little more challenging to become a credit union member than it is to become a bank account holder. Credit unions usually require their members to qualify based on their residence, military status, or another factor. Banks will generally accept anyone who shows ID and isn't on the Chexsystems list.

Advantages of Credit Unions

You may enjoy some of the advantages you get from being a credit union member. One of the critical benefits credit union members love is that credit unions have better interest rates. This benefit tends to go both ways. Credit union loans and credit card interest rates are usually much lower than what traditional banks offer. The savings account return rates are generally higher as well. Furthermore, some credit unions offer cash back accounts with more favorable return rates than those at traditional banks. Additionally, monthly fees tend to be lower at credit unions than at conventional banks.

Which Option Is Right for you?

Choosing where to store your money is your right, and no one can tell you whether you're right or wrong in doing so.

Now that you know the differences between banks and credit unions you can use the information above, and be sure to take your time researching both options so that you can choose what's best for yourself and for your family.