When looking to open up a checking account or a savings account many individuals will look for the traditional bank in their local area. Lately, many consumers have switched over to a credit union for those same purposes. Just why is this happening? What is the difference between a credit union and a bank? Let’s take a look at some of the key differences and find some answers.
One of the main differences between a credit union and a bank is the lower interest rates that credit unions offer. Most traditional banks are for-profit institutions. This means that the bank survive off the fees and finances of the consumers while the credit union does not. Credit unions offer better interest rates than traditional banks because the credit union has their primary goal of covering their operating cost as opposed to making a profit. Most traditional banks have high-interest rates for their clients when looking for an automobile loan or a home mortgage loan. This is why credit unions have become so attractive today; credit unions operate under a system that places the consumer first. This is one of the most important features that have made credit unions so popular with the consumer base. Knowing that a consumer is a partner and not just a customer has a mental empowering effect.
Another difference between credit unions and banks that have made credit unions more popular are the overdraft fees and the account maintenance fees. Most traditional banks have account maintenance fees that the client is charged on a monthly basis. Although such maintenance fees come with various stipulations that when fulfilled the client will have no maintenance fees; however, most clients end up having some sort of monthly fee. Federal credit unions do not have such fees and this is what has made credit union so popular with consumers today. Not having to be concerned about meeting fiscal deadlines to waive a monthly maintenance fee is a rather awesome feeling for the consumers. Overdraft fees happen with traditional banks and this is where a portion of the bank’s Revenue comes from. With federal credit unions, there are no overdraft fees. To find a federal credit union near me, I just need to do an online search.
Lastly, another difference between credit unions and banks are that with a bank, the customer is just that, a customer. With a credit union, the customer is a member or a stakeholder. This is why the profits of the credit union are passed through to the members of the same. These profits that are passed through result in lower interest rates and lower fees. Credit Unions offer credit cards in the same way traditional Banks do as well. The card from the credit union will have lower fees and lower interest rates because of the above-mentioned structure. As many members receive lower fees and lower interest rates, more reviews will be spread across the globe that continues to make credit unions attractive to consumers in the financial arena.