Major Differences Between Credit Unions And Banks

If you have recently moved to Massachusetts and are looking for a banking institution

, you will need to select between a credit union or a bank. But which is right for your needs? Many people do not understand the differences between these different financial institutions, and make choices based on ads they see rather than cold hard facts. Each claims to be better than the other. Who should you believe?

The answer lies in understanding the real differences between the two types of institutions. Each has different benefits, and you should understand these before you make a choice of which type of accounts to open. Here is a list of some of the defining features of how these different financial institutions operate.

1-Credit unions generally have lower interest rates for loans on cars, trucks, and other small loans. Check around to make sure, however, since all rates are different at varying times.

2-Large banks are usually more likely to offer free ATMs in convenient locations. If you use ATMs for cash a lot and you decide to switch to a credit union, you should withdraw cash from your credit union to avoid having to pay a lot of ATM fees.

3-During the current great recession, banks have been blamed for a lot of the woes coming from extending credit and loans to overextended customers, resulting in a record number of home foreclosures. The credit unions in the US are mostly not to blame for the problems of foreclosures and overextended credit that have triggered the great recession.

4-Banks and credit unions are both financially safe options, as both are completely well insured financial institutions, no matter what one may say of the other. Different parties insure them, however. The US government's Federal Deposit Insurance Corporation (FDIC) insures banks. Credit unions, on the other hand, are similarly insured but it is not by a government entity, although the NCUA insures deposits you make at them.

5-Banks are operated for profit. Banks generate income for investors and executives. On the other hand, credit unions are non-profit organizations. They are not designed to be making money, with any profit made after covering operating costs paid back to directly help the organization's members, such as in saving account interest rates.

6-People who use a bank are considered customers, while people who use a particular credit union are members of that credit union. Members of a credit union have voting rights in elections for board of directors and help make other decisions, while bank customers do not have any say in executive decisions or in electing the board of directors.

by: Art Gib

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