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Credit Unions vs. Banks: Are Credit Unions Better Than Banks?
Although credit unions and traditional banks are financial institutions that offer similar products and services (e.g., loans, checking accounts, etc.), there are still plenty of differences between credit unions and banks.
For starters, it is crucial to understand that banks operate for profit, and anyone can conduct business with them.
Credit unions, on the other hand, are nonprofit and offer their services only to their member-owners, so their operational model is totally different.
As the fastest growing credit union in Southern California, Credit Union of Southern California (CU SoCal) is uniquely positioned to explain the benefits of credit unions, as we’ve provided a range of financial services to our members for more than 60 years.
Our family of products includes auto loans, personal loans, checking accounts, savings accounts, mortgages and a lot more – all available at competitive rates so you don’t have to depend on your neighborhood bank to fulfill your financial needs.
With more national ATMs via the COOP Network at your disposal compared to Bank of America, Chase, and Wells Fargo combined, our members are also never too far from their savings.
After you’ve determined that a credit union is right for you, why not open an account with us? If you’re still not convinced, then please feel free to read through the rest of this post!
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Credit Unions
The primary reason that many consumers feel that credit unions are better than banks is that credit unions are not for profit institutions that pay higher rates on savings accounts and charge lower rates on loans. Fees are generally lower in credit unions as well.
While some credit unions serve only certain groups – such as teachers, union workers or employees of a certain company, other credit unions have much broader criteria for new members. For example, anyone who lives, works, attends school or religious services in Los Angeles, Orange, Riverside or San Bernardino County can join Credit Union of Southern California.
People often ask, are credit unions safer than banks?
Deposits at both banks and credit unions are insured by the federal government up to $250,000. Whereas banks are protected by the FDIC (Federal Deposit Insurance Corp), credit union deposits are protected by the NCUA (National Credit Union Administrations). Each depositor is covered for up to $250,000.
Banks
When comparing credit unions vs. banks, it’s helpful to learn a bit about the history and purpose of banks, including the fact that they were started by merchants to hand out loans in the form of grain to traders and farmers. The current Bank of New York came into being in 1784.
Banks are almost always for-profit institutions, and while they tend to offer competitive, low-interest rates for loans, they almost always have higher fees than credit unions.
Perhaps the biggest difference between banks and credit unions is that there is usually no restriction on who can get services from a bank, whereas most credit unions have membership requirements to join.
Which brings us back to the question — are credit unions safer than banks? They are both safe, because deposits at both institutions are federally insured.
Differences Between Credit Unions & Banks
So what is the difference between a bank and a credit union?
People who are allowed to open an account at credit unions are referred to as members, whereas bank account holders are called customers.
Since credit unions are member-driven and not for profit, members receive higher interest rates on savings, lower rates on loans and lower fees.
On the other hand, profits made by banks are only distributed among their shareholders, meaning that the money banks make isn’t returned to the people they make it from.
This tends to make credit unions more attractive than banks, on the whole, as loans cost less, and savings accounts earn more, but the catch to credit unions is that you must satisfy their membership eligibility requirements to become a member.
Finally, to date, no credit union has ever needed to be bailed out using taxpayer money. In contrast, plenty of banks in the history of the United States have failed and required FDIC oversight.
Similarities Between Credit Unions & Banks
Despite the many apparent differences, there is also a multitude of similarities between banks and credit unions.
For starters, both institutions offer savings accounts, personal loans, auto loans, mortgages and checking accounts.
Both institutions provide services for individuals, and many provide businesses banking as well.
And above all, no matter where your money lies, you have insurance coverage for up to $250,000 by the federal government.
Both banks and credit unions are also subjected to similar laws and agencies regarding mortgages, loans, and safety. Ultimately, the customer experience they offer can be very different.
Benefits of Choosing a Credit Union
Here are some of the many benefits of credit unions vs. banks that you will want to consider when choosing what type of institution to use for your financial needs. We’ll use Credit Union of Southern California (CU SoCal) as our example.
Higher Savings Rates
In 2018 alone, the average annual savings per CU SoCal member household was $265.
We returned $13 million to members in financial benefits (low interest on loans and high interest on savings), and a record of $2.9 million was distributed as dividends to our members.
Lower Interest Rates
Thousands of people choose us for auto loans, personal loans, mortgage and home equity loans because we offer some of the best interest rates in the market.
Lower Fees
One of the key differences between credit unions and banks is the fee structure. While banks often have hidden charges that are buried in the fine print of their contracts, credit unions typically have lower fees and disclose them up front.
Better Customer Service
Credit Unions are known for their excellent service to members, whether in person in a branch or over the phone. Solving problems and being advisors is to members is deeply embedded in the credit union community.
More Lenient on Credit History
As profit-driven organizations, banks demand higher credit scores of consumers than credit unions. You are much more likely to get approved for a loan at a credit union if you have less than perfect credit.
CU SoCal Banking Services & Products
We offer a full range of financial products and services. However, the rates and convenience we offer make us the superior choice for many Californians.
At CU SoCal, our financial services include:
Checking Accounts
CU SoCal checking accounts allow mobile banking, bill payments, and much more.
As part of the service, you can get your personal Visa debit card from any of the CU SoCal branches
.
You can opt for a Classic Checking account or a Rewards checking account, and with tens of thousands of ATM locations available through the COOP Network, your funds will never be out of reach.
Savings Accounts
Only a $10 minimum deposit allows you to open a savings account with CU SoCal.
As long as you maintain a $500 balance, we will be sharing dividends with you too.
Above all, you get all the necessary services such as automatic deposits and transfers, online services such as mobile banking, online banking, and much more.
Mortgages
Whether you want a mortgage to purchase a new home, you’d like to refinance your current mortgage, or apply for a reverse mortgage, CU SoCal can help make it happen.
Auto Loans
Our auto loans are available at very competitive rates, and you can qualify for receiving up to 120% financing on new or second-hand cars too.
And with an auto loan from CU SoCal, the payback period can be extended up to 84 months, reducing your monthly payments and making it far easier to keep up with your loan.
Apply for a CU SoCal Account Today!
CU SoCal has been in business for more than 60 years, serving our Members with comprehensive financial solutions and great customer service.
With thousands of satisfied Members, there’s no wonder why CU SoCal is the fastest growing credit union in Southern California.
Now that you understand the differences between credit unions and banks, let us be your financial partner.
Apply for a new account today!
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