3 Major Differences Between Banks And Credit Unions

When it comes to finances, there is a lot of discussion and controversy about banks versus credit unions. Many financial experts and everyday people state that credit unions are much better than banks. However, understanding the facts and details surrounding this statement is very important. Read on to discover the major differences between banks and credit unions.  

1. Banks Are For-Profit Organizations

Banks are for-profit financial institutions, and they have shareholders that invest in them. They earn money from the interest that is earned by the banks. These shareholders want to earn as much revenue as possible. This gives banks the incentive to earn more money. Because of this, fees and interest rates tend to be higher at banks. Banks are known for charging:

• ATM usage fees

• monthly or yearly account fees

• account closure fees

• minimum balance fees

• human teller fees

• overdraft fees

2. Credit Unions Are Non-Profit Organizations

Credit unions are non-profit financial institutions. They are operated and owned by members of the credit unions. External shareholders do not invest in credit unions. Profits are not generated for shareholders when the credit union makes more money. This means that credit unions have no incentive to charge excessive fees. BankRate.com shows that credit unions are known for charging:

• lower overdraft fees

• lower ATM usage fees

• low or zero monthly maintenance fees

• low or zero annual maintenance fees

• low or zero human teller fees

3. Credit Unions May Offer More Member Advantages

Now that you know the main difference between credit unions and banks, you can understand why they have different interest rates and fees. Since credit unions do not make a profit from charging extra fees, they simply tend to avoid charging these fees. Credit unions are well-known for offering:

• high-interest savings, checking, and money market accounts

• low-interest loans and financing options for car, homes, and more

• better customer service and customer-oriented practices

• flexibility to members who have a poor credit history

Despite these perks, credit unions do have a few minor disadvantages. They tend to have fewer locations and less advanced online services. This may be inconvenient for members who travel frequently or prefer using online banking. However, many members find that these inconveniences are worth the numerous perks and the financial savings. Some people opt to have an account at a traditional bank and at a credit union simultaneously. This can eliminate the small downsides to solely using a credit union. Overall, credit unions (such as New Horizons Credit Union) are a great resource for people who want to use a hassle-free, affordable, and customer-oriented financial institution.