Maybe you’re frustrated with getting hit with high monthly fees each month, or maybe you feel like you’re not earning a satisfactory interest rate. Perhaps you’re just ready to entrust someone other than a bank with your money. Whatever the reason, there may come a time when you begin to look at credit unions. There are major differences between the two, and you should know what to expect if you make the switch. To help weigh the pros and cons, here is a know-all guide to credit unions.
What is a credit union?
A credit union is similar to traditional banks in a big way: They both offer financial products to customers. Credit union members have access to all of the same products that bank customers do, such as checking and savings accounts, CDs, loan products, and credit cards, per Money Crashers.
That’s where the similarities end. A big difference between the two is that a credit union is a not-for-profit institution. Because credit unions operate that way, they’re able to usually offer you higher interest rates on savings accounts and CDs, as well as lower interest rates on loan products and credit cards.
Another difference — which also works to your benefit – is that credit unions are member-focused institutions. It’s a cooperative, meaning it’s owned and operated by its members, rather than being owned by stockholders (like a bank). Once you make an initial membership deposit, it makes you part owner of the credit union, automatically giving you a say in the credit union’s decisions, according to Money Crashers.