In most aspects of personal finance and money management, we’re left to discover things ourselves. Schools offer a limited curriculum, and parents don’t always have the right ideas about these topics, despite their best intentions to help.
That’s why it’s so helpful to go back to basics now and then, making sense of important terms and concepts that help us navigate the world of money.
A perfect example is learning the difference between a credit union and a bank, two institutions that share key similarities but also several distinctions.
Knowing the pros and cons of each one - and how to utilize their services best - will give you the edge in your efforts to secure loans, access funds, chip away at debt, and more.
Let’s highlight all the must-know info about both credit unions and banks, complete with their pros, cons, and quirks that will help you achieve those financial goals,
Let’s touch on the basics first. A credit union is a financial institution that offers services to members such as checking accounts, savings accounts, insurance for member funds, physical branches, and ATMs.
There are currently more than 5,100 federally insured credit unions in the United States, typically organized around a specific set of goals and serving a particular demographic of working or retired individuals.
Navy Federal Credit Union, for example, has more than 10 million members and tens of billions in assets. However, most credit unions are small, primarily due to their structure and unique mission statements.
The main distinction is that credit unions are not-for-profit institutions owned cooperatively by their members. This means that members receive any profits the organization generates through better interest rates, member benefits, educational programs, and customer service.
On the other hand, banks are traditionally profit-driven, meaning they’re operated with strict business principles and seek to maximize results for shareholders - not necessarily the customers.
This isn’t to say that banks are unethical or that you should avoid them. However, this fundamental distinction - the structure and ownership of a credit union - helps us get a clear vision of how these organizations work and the advantages they provide.
As we dig deeper, we see more differences between credit unions and banks. Credit unions often specifically serve members of a particular community or contingent of workers, such as retired military, religious organization members, or multi-generational families.
You’ll find that some credit unions require you to be “grandfathered” into membership, while others have less strict limitations on who can join. This is rarely the case with banks, which will take you on as a member if you have the cash.
With that said, eligibility requirements at some banks can be steep, depending on factors like exclusivity and service features.
Remember that every credit union will bring unique services and perks to its members, and it’s worth investigating these details during your research process. Only then can you make the best decision for your financial needs.
When you become a credit union member, you gain access to many great features and services that can dramatically improve your financial situation over time.
Overall, credit unions offer a more old-school approach to financial services that many people find inviting and attractive. The upsides of credit unions are hard to deny, especially if you’re looking to maximize your savings rates, get the best loans available, and enjoy the many customer service perks these institutions are known for.
While credit unions offer plenty of advantages, they also come with downsides.
More broadly, credit unions are not as popular or widespread as they once were, catering to an older generation of people and not always offering robust member benefits. While some critics say the golden age of credit unions is over, we’ll leave that to you to decide.
Banks have unique offerings based on size, scope, customer service policies, technology, and more.
Let’s talk about the pros and cons of banks, but remember that every institution has different policies and features that will factor into your final decision.
These upsides apply to the industry’s heavy hitters like Chase and Bank of America and up-and-coming mobile banking services like Chime and Varo that are blazing new trails in the fintech space.
In terms of pure convenience, access, and technological advancement, there’s no outcompeting today’s banks, especially those that embrace an agile business model with low overhead and maximum utility.
Even the best banks come with cons, and customers should be aware of them when browsing options.
Lastly, you must research small startup banking services before you go all-in. Avoid offers that seem too good to be true. Play it safe, and choose from hand-picked partners selected for you by Steady to ensure you stay protected as a customer.
With a solid foundation of info, you can now make an informed decision when choosing between a credit union and a bank.
It starts with identifying your priorities, what matters most to you as a customer, and what you expect from your financial institution.
Do you want the most agile, minimalist banking experience on your smartphone? Check out one of the innovative new mobile banks. Is your goal to build a connection with a hometown organization you can trust for the long haul and get the best possible rates? Your local credit union will be the wise option.
At Steady, we’ve researched to simplify the process and narrow down the best picks for you.
Don’t forget that there is also a spectrum of services and features in both credit union and bank categories - it’s never a cut-and-dry distinction between the two, so read the fine print always.
Learning about different financial institutions, how they’re structured, and what they offer is the first step to mastering your finances and leveling up.
Once you’ve determined whether a credit union or bank is a better fit for your lifestyle, it’s time to connect with an organization that checks all the most important boxes.
Let Steady be your gateway to finding the best match, with all the relevant info and ways to earn incentives that put cash in your pocket faster. With so many great options, it’s just a matter of time before you find your ideal arrangement.