To best grasp the concept of the credit unions’ services we will compare them to those offered by conventional banks. Although credit unions and banks offer very similar products and both are known to keep money very safe, there are some distinct differences between the two organisations. While both organisations offer savings and checking accounts as well as loans, credit unions are owned by their members and are not-for-profit while banks are run for profit. Let’s take a closer look at the similarities and differences between both.
Ownerships – A Major Difference
Customers own their credit union and are called members not customers. Conversely, investors are the owners of banks, although they may be several large investors or thousands of stock holders. This is the difference which primarily affects the way in which both institutions operate. In theory, credit unions are able to offer their members a better deal than banks can offer their customers as there are no outside investors to try to increase their profits at the customers’ expense. Most credit unions pay higher interest on members’ savings and offer checking free to everyone as well as lower loan rates.
Who Can Use Their Services?
One of the major differences between credit unions and banks is who they can offer their services to. Credit unions can only offer their services to people who are members and who have met an eligibility requirement. These differ between organisations but could mean that potential members have to attend the same church, work in the same industry, live in the same community or be part of a specific organisation.
Products On Offer
Although both credit unions and banks can offer similar products, small credit unions cannot offer more specialised services. While both credit unions and banks offer checking and saving accounts as well as loans for cars and homes, banks have the facility to offer large commercial loans and mortgages unlike credit unions.
The Difference In Technology
Banks have the money to invest in the latest technological advances, and therefore have websites and mobile apps for customers to use. The larger credit unions can also offer this functionality, however the smaller ones often cannot.
Both credit unions and banks can offer a high level of customer support however credit unions often offer a more personal level of service tailored to the needs of its members since they are designed specifically to serve their community and know its needs best. With fewer members, credit unions can get to know each individual more personally and develop stronger working relationships. On the other hand, larger banks have the facility to offer 24 hour services which is more useful for those who work awkward hours and who demand greater flexibility from their service provider.
Which Is Best?
Both credit unions and banks offer excellent financial services, so when determining which is best for you, you need to look carefully at the fees, services and products which your chosen institutions are offering. It’s best to go with the best deal to meet your individual needs regardless of whether it’s a bank or a credit union.