Old School Brick and Mortar or Credit Unions?
Are you tired of the high fees and garbage interest rates that the brick and mortar banks charge you? It seems like the big corporate banks can get away with charging you anything! In this blog post, you will learn what is the difference between the two: banks vs credit unions.
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What Is The Difference Between Banks and Credit Unions
The differences between traditional Banks vs Credit Unions are:
- Ownership and Purpose
- Rates and Fees
- Convenience and Service
1. The Difference In Ownership and Their Purpose
The main difference between banks and credit unions is who owns the company. This is the most important key factor in differentiating the two because the ownership of the company dictates the company’s fundamentals and goals.
Credit unions are owned by a group of members within a community (community workers, firefighters, church people, etc). Credit Unions are “non-profit organizations” which means their main intention is to give back to the community rather than profiting from them.
On the other hand, larger banks like TD, CIBC, and RBC are all publicly traded on the stock market. These banks are called “for-profit organizations”, meaning that these companies are owned by shareholders with their main goal is to generate as much profit as possible.
How do you generate profit within a business? You sell a product or service higher than the cost of providing it.
2. The Differences in Rates and Fees
Banks need to sell or provide their service at a specific rate in order to generate any profit to further develop their business and to satisfy their shareholders. This is where you can expect to see banks charging you a hefty fee with a low-interest savings account and high-interest borrowing rate.
Well, you can’t blame them because they’re a business and they need to make money somehow.
Credit unions are satisfied with breaking even, but even with a tiny profit, those profits are redistributed back to the community through lower fees, higher interest rates, and lower borrowing fees. Once again, credit unions are non-profit organizations meaning that generating profit is not their main intention.
3. The Service and Convenience of Both Banks and Credit Unions
This is where banks may have the upper edge on this fight between banks vs credit unions. Banks are generally more developed and saturated to where the companies can provide the service and convenience that credit unions can’t match.
Credit unions do have many ATMs and branches, but banks have many things that credit unions have yet to provide.
- Robot-like customer service
- Tonnes and tonnes of ATMs and Branches
- Additional Services Provided
- Assorted and Unique Accounts
- Technologically Advanced
- Online Banking Service
Although banks may have the winning factor in this point, credit unions are smaller; which means that they are more relationship-based rather than the straight forward “by the book”.
It is definitely possible to get a loan approved at a credit union whereas a traditional bank may refuse.
Banks vs Credit Unions Conclusion
These are the differences between banks and credit unions: Which is the better option?
If you are the average person who requires basic banking services such as depositing, withdrawing, transfers, small loans, basic savings, then credit unions are a great option for you.
If you need more than just the basic banking service like large loans, foreign transactions and depositing, specialized financial products, advanced online services, reward points, and benefits then the corporate structure of traditional banks is the better option.
Keep in mind that both banks and credit unions are both insured meaning that your money is safe in either banking institutions.
If credit unions seem like the better option for you then look up your nearest non-profit banking organization to join! They may require a small fee to become a member!