7 Ways Credit Unions Are Better Than Banks — BELLCO FCU (2024)

FAQs

What is one reason that a credit union is better than a bank? ›

Better interest rates: Credit unions typically offer higher interest rates on savings accounts because they have lower overhead costs than banks. Similarly, they offer lower interest rates on loans. Customer service: Credit unions pride themselves on offering better customer service than banks.

This is because credit unions use fewer risks, serving individuals and small businesses rather than large investors, like a bank. Credit unions are member-owned, not-for-profit organizations that serve a smaller, more defined client base within a community.

Credit Union Advantages: Why Bank At A Credit Union

Higher returns, better savings, low interest on borrowings, and a sense of community – these are just a few of the benefits of credit union membership.

First, bankers believe it is unfair that credit unions are exempt from federal taxation while the taxes that banks pay represent a significant fraction of their earnings—33 percent last year. Second, bankers believe that credit unions have been allowed to expand far beyond their original purpose.

With a credit union, you might have to do some extensive research to compare accounts and find out what services they offer. Credit unions only serve certain groups of people and if the ones you can join don't have mobile banking or their apps aren't up to par, that could potentially be a major disadvantage.

One of the major downsides of traditional banking is the potential for fees. Traditional banks often charge various fees for services such as overdrafts, ATM withdrawals, and account maintenance. These fees can quickly add up and eat into your savings if you're not careful.

Credit unions typically charge fewer fees than banks, and the fees they do charge are far lower than what you'd pay at a bank. Also, they typically charge lower rates for loans and pay higher rates on savings. Credit unions promote financial literacy, with programs on money management for all ages.

bank in a recession, the credit union is likely to fare a little better. Both can be hit hard by tough economic conditions, but credit unions were statistically less likely to fail during the Great Recession. But no matter which you go with, you shouldn't worry about losing money.

By focusing on returning value to the membership, credit unions are able to offer rates that beat those of traditional banks. Plus, members typically have access to: More flexible lending decisions than traditional banks. Personalized member support.

Banks are for-profit, meaning they are either privately owned or publicly traded, while credit unions are nonprofit institutions. This for-profit vs. not-for-profit divide is the reason for the difference between the products and services each type of institution offers.

What happens to credit unions if banks collapse? ›

If the bank fails, you'll get your money back. Nearly all banks are FDIC insured. You can look for the FDIC logo at bank teller windows or on the entrance to your bank branch. Credit unions are insured by the National Credit Union Administration.

One of the only differences between NCUA and FDIC coverage is that the FDIC will also insure cashier's checks and money orders. Otherwise, banks and credit unions are equally protected, and your deposit accounts are safe with either option.

Which is Safer, a Bank or a Credit Union? As long as you are banking at a federally insured institution, whether it is a credit union insured by the NCUA or a bank by the FDIC, your money is equally safe. Credit unions are owned by the members—your savings account at a credit union is a share of ownership.

Since credit unions are member-driven and not for profit, members receive higher interest rates on savings, lower rates on loans and lower fees. On the other hand, profits made by banks are only distributed among their shareholders, meaning that the money banks make isn't returned to the people they make it from.

NOT-FOR-PROFIT

Credit unions operate to promote the well-being of their members. Profits made by credit unions are returned back to members in the form of reduced fees, higher savings rates and lower loan rates.

Credit unions are an alternative that offers several benefits over traditional banks. They charge lower fees and offer higher interest rates on savings accounts and loans. This can save your business money in the long run. Additionally, credit unions often provide more flexible loan options.