Financial savings are important for all people and individuals. They help us realize our long-cherished goals (for instance purchase of a house) and may also help us sail through the tough times (for instance a medical emergency). However, when a person wishes to save money and open a financial account for it, he or she gets multiple options including the credit unions and the banks. Read the article and information below to find out a better option for opening a financial savings account when you are evaluating options including Credit Unions and Banks.
Differences between the Banks and Credit Unions
Over a period, the differences between the banks and the credit unions have reduced. However, there are still many profound differences that may impact your choice and judgment.
Ownership: the Credit Unions are nonprofit organizations and are found to focus more on the needs of the members. Banks on the other hand are for-profit organizations. That is why the banks have higher fees when compared to the credit unions.
Interest rate: Banks are also required to make money for the people who invest in them. Therefore, they have a low-interest rate on the savings account. Banks also charge high-interest rates on the loans they provide. However, credit unions charge a low-interest rate on the loans and provide higher interest rates on the savings account as they work in the interest of their members.
Membership: opening a financial and saving account is easy at a bank. However, you can only have a savings account at a Credit Union when you can qualify for the membership. Even if you have a good amount of cash and money with you, a credit union will only give you membership when you possess the eligibility qualifications.
Safety and Insurance: Your money in a bank is insured against theft or loss by FDIC (Federal Deposit Insurance Corporation). The NCUSIF (National Credit Union Share Insurance Fund) provides such insurance for the credit unions and the money they have. These are the Agencies that also have government backing. However, you should ensure that your bank or credit union has the necessary insurance cover before you put your money in it.
Online Banks
One can easily say that saving money in the credit unions can be a better proposition as it would provide better and higher financial returns. However now we also have online banks that are gaining popularity increasingly. Online banks are run and operated solely on the internet. Because these banks do not have any infrastructure, for instance, parking lots or buildings, they can offer their services at much lower fees. The online bank also offers better interest rates on loans and savings when compared to their physical and brick-and-mortar counterparts.
Benefits of Credit Union
Credit unions may offer a plethora of benefits to their members. Some of the important benefits include:
- More personalized service for the customers.
- Free financial education coaching and counseling for the members and the availability of financial literacy resources.
- Free of cost checking accounts that do not have any minimum balance requirement.
- Good interest rates on saving accounts and lower fees.
- Available in the local communities.
- More flexibility for attending to the needs of the customers. There have been instances when large banks have provided bad customer service.
Benefits of Bank
Banks may also offer certain unique benefits including:
- Modern and better technology in the form of online apps (for smartphones), the latest website features, and other digital tools.
- Availability at the more convenient locations and better speed and convenience in the transactions accomplished.
- More products and services.
- A large ATM network that is available to the customers free of cost.
Conclusion
In the majority of cases, saving money in the Credit Unions can be a better option as these unions charge lesser or no fee for account opening and also offer good interest rates for the members on loans and savings accounts. However, you would also like to consider the online banks that may offer better financial benefits and good interest rates. Whether it is a Credit Union or a Bank, your money is equally safe in either of these places as it is fully insured by agencies that are backed and supported directly by the government. However, while interest rate and loan repayment rates are important for financial reasons and cost-effectiveness, many people are also looking for certain features when they want to have a savings account. For instance, having access to a wide ATM network may be a priority for many. Therefore, when choosing between a Bank and a Credit Union for a savings account, you need to evaluate the features that you want and make a decision based on them.