How do you choose between a Bank and a Credit union? Both options offer a ton of features and your choice should be the better one with the rate of interest for the amount you want to deposit.
Both banks and credit unions offer three types of accounts – savings accounts, checking accounts and certificates of deposit (CD). Let’s take a look at what each option offers, and which one is best for you.
Here are a few questions you can ask in order to narrow down your options.
What rate of interest will I get in a Bank or a Credit union?
The rate of interest offered by the account will determine how much you will earn every year on your deposit. In this regard, credit unions have the upper hand as they usually offer higher rates of interest when compared to banks. This way, you will be able to grow your money faster. There are certain banks that offer high-yield rates as well. Online banks also offer higher rates of interest. See if you have to fulfill certain criteria to be eligible for these rates. If so, choose the option that has easier criteria to satisfy.
Bank or a Credit union: what gives me access to physical branches and ATMs?
Banks usually have more branches than credit unions. They also have a wider ATM network, giving you access to easy cash deposit and withdrawal options. So, if you are looking to get personal service at a branch, opting for a bank account may be the better choice. At the same time, if you’re someone who has the habit of withdrawing money from an ATM often, you should look for a bank that has an extensive ATM network.
Bank or credit union: What charges a lesser fee?
For the latest fees and charges, you should ask the bank or credit union you want to apply to. Usually, most of these financial institutions do not charge any fees for opening and maintaining an account. Some offer free accounts if you maintain a certain minimum balance while others don’t require you to maintain a minimum balance.
Other differences between banks and credit unions
Here are a few other differences that may help you make your decision.
Profit vs non-profit: Banks are predominantly businesses run for making profits while credit unions are not-for-profit organizations.
Customer service: In terms of customer service, credit unions hold the upper hand. They usually off better service to their customers although banks are now catching up as well.
Rates of interest: Since they are non-profit organizations, credit unions tend to offer slightly better APYs. They also charge lower interest rates on borrowings and loans.
Technology: Banks usually tend to adopt and implement technology faster. All major banks have highly adaptive and customer-centric mobile apps and websites.
Deposit insurance: Both types of institutions offer accounts that are federally insured up to $250,000.
Savings Account, Checking Account or CD?
Each of these options offers certain unique features:
Interest rates: CDs or certificates of deposit usually offer the highest interest rates among the three. However, there are certain online banks that offer high-yield accounts as well.
Account accessibility: Checking accounts offer the most flexibility in terms of accessibility. You can use them to make daily payments and can be used as many times as you wish. Savings accounts can be accessed only up to 6 times per month. CDs do not allow you to withdraw funds until the maturity date.
Your choice should be based on how much you want to earn on your deposit and how often you want to access your funds.
While choosing between banks and credit unions, base your choice on who offers you better value for your time and money. Find out which option gives you the best features. If you’re more of an online user, an online bank may be the right choice for you. If customer service is what you need, a credit union may be better. Look for the best rate of interest and accessibility to withdraw your money whenever you want. These should help you make your choice.