Credit Union vs Bank – How to Choose

Credit unions are not right for everybody. Here's how they stack up against banks.

Competitive Rates

Credit unions may be small in comparison, but they give the big banks a run for their money. Banks are all about profit -not a customer-friendly situation. Banks assess every fee they can while offering the least attractive interest rates possible and still remain competitive. However, banks will often offer a loss-leader, highly competitive CD rates, for example, to bring in new customers. You won't find loss-leader deals at credit unions. If you're CD shopping, look everywhere to take advantage of the best deals. You do not have to buys CDs at your primary financial institution.

Products and Services

Not all credit unions offer the full range of products and services, but most offer enough services to be competitive. Before you decide, make a list of banking services you need and find out which institution will serve you best.

Ownership – the BIG Difference

Being a member, as opposed to being a customer, is a significant difference. Since credit unions are nonprofit organizations, they are more focused on the needs of their customers than on meeting the demands of their investors. Not all credit unions operate the same way, and it should be noted that not all savings are passed along to the members. That depends on the people running the show, and on the financial health of the credit union. Banks have the “purchasing” power to undercut small institutions and frequently do.

Politics

If you believe that banks are largely responsible for the mess that the U.S. economy is currently in due to predatory lending practices, risky investments, and greedy management, you are not alone. Credit Unions are not huge, faceless, megalith corporations, they are generally small to medium local or industry-specific nonprofits. It's up to you to decide which type of business you prefer to support.

There’s no single answer to the question of credit union vs bank, and fortunately, it is not a permanent decision. If you decide on one and then find you want to switch, it is not that difficult.