Most people assume their only option when they need to open a new financial account is to go to a bank. But there you have other options and other choices to make besides which banks you should consider. For example, you may want to consider a credit union instead, depending on your circumstances. The following pros and cons can help you make a decision before opening a new account.
Pros of a Credit Union
Credit unions are owned by their members, so they return their profits to those members. They can return profits by paying higher interest rates on savings accounts and CDs (certificates of deposits). Another advantage of a credit union is that members can often get lower rates on mortgages, car loans, and other types of loans.
They are not-for-profit organizations, whereas a bank’s goal is to make a profit. Since they are not-for-profit organizations, they do not pay most types of federal taxes. Because they do not pay these federal taxes, many of their services are cheaper than a regular bank, services like checking accounts.
They are usually regional and not available nationwide. Because of this, customers can get more personalized service. Customers get to know the employees and loan officers, which provides better customer service and possibly a better rate on a loan. Your money is just as safe as it is in a bank. NCUA insurance protects all deposits up to $250,000.
Pros of Banks
Banks often operate on a national level, so you can find a branch of your bank almost anywhere when you travel domestically. You don’t have to be a member, and anyone can open an account at a bank.
There are usually more offerings at a bank, like large business loans and credit cards. If you’re not sure what kind of account you need to open, or if you might need to open more diverse accounts later down the road, you might want to look at a bank instead.
Your money is insured up to $250,000, like at a credit union. However, at a bank, that insurance comes through the FDIC.
Cons of a Credit Union
Since they are usually regional and not nationwide, you won’t usually find branches of your credit union throughout the country. Because of that, if you travel a lot, either for pleasure or for business, you might struggle to access your money if you don’t have a backup bank account. There are some credit unions that operate nationally, so if this is a concern for you, you might want to check out those credit unions.
Also, credit unions don’t have as many branch offices locally. You might not have a branch office close to your home and work, especially if you move or change jobs.
You also must be a member to use a credit union. You cannot just walk into one and open an account like you can at a bank. They usually have some requirements to be eligible to be a member. However, usually, these requirements are small, like requiring you to deposit $5 into a savings account to become a member.
Cons of Banks
Since a bank is in business to make a profit for its shareholders, they tend to have more fees, and those fees tend to be higher than those at a credit union. Even services like free checking accounts often come with requirements like minimum balances and direct deposits. The service at a large bank will also be less personalized than it would be at a credit union.
When you open a new savings or checking account, you might have more options than you think. Do your research on both banks and credit unions in your area to find the best fit for your specific needs.