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Bank vs Credit Union. 馃彠 What's The Difference? - YouTube
Channel: DollarSprout
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- A big decision when finding
a place to store your money
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is choosing either a
credit union or a bank.
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So today we're going to be walking through
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the similarities and differences
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of these two financial institutions.
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(electronic music)
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Hi, I'm Marissa with DollarSprout
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and today we're talking about
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the similarities and differences
of credit unions and banks.
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And while we're talking about
which one may be best for you
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and your situation, we'd
love to hear your opinion.
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Let us know in the comments
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which banking institution you prefer.
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And if you're new,
scroll down and subscribe
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to the DollarSprout YouTube channel
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so you won't miss a new money video.
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At first glance, the similarities
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between banks and credit
unions may seem evident
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as they both offer checking
and savings accounts,
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and even loans and credit cards,
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but there are some very real differences
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between banks and credit
unions that may affect
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your banking experience.
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Depending on your particular needs,
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a bank or credit union might
be a better option for you.
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So what is a bank?
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A bank is a business.
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Banks allow you to deposit
your money with them,
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in turn, they lend out
a portion of that money
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to people who need loans.
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Banks earn interest off of the loans,
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and to entice you to deposit more money
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so they can make more loans
and earn more interest,
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they offer you a small
amount of interest in turn.
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In general, banks will let
anyone open an account with them.
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There are only a couple
specific requirements
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to open an account, like living within
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the bank's service
area, being a US citizen
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and meeting the minimum
balance requirements.
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Banks can be owned by private investors
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or traded openly on the stock market.
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Either way, banks have
owners and shareholders
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who drive a lot of the
decisions that banks make.
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A credit union on the other hand,
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is a nonprofit organization.
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They're owned by members, which are people
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who actually use the credit union,
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like opening an account
or taking out a loan.
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Membership is usually restricted to people
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in a certain group, for
example, people who live or work
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in certain areas, who
work for certain employers
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who have a family connection
to the credit union.
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Credit unions are governed
by boards of directors
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who make the decisions based off of
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the best interest of the members.
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This means that they make a
slightly different decisions
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than banks because they're
not trying to maximize profits
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for a small group of bank owners.
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Now that you know a little more about
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banks and credit unions themselves,
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here's how they differ on
key banking components.
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Product.
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Banks and credit unions
offer a similar suite
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of basic products.
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For example, basic checking
and savings accounts
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are offered at most any
bank or credit union,
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but they do differ on some products.
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Credit unions are more likely to offer
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a wider range of savings accounts.
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It's also common for credit unions
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to offer kids and teens savings accounts.
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Banks, on the other hand,
are more likely to offer
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more specialized high-end products
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like wealth management
investments or business accounts.
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Interest rates.
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In general, credit unions
offer better interest rates
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on deposit accounts, and
lower interest rates on loans.
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This is due to their
ownership characteristics.
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As we talked about earlier.
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credit unions are owned by
and make the best decisions
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for their members.
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Banks often have poor interest rates
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because this will generate
more profits for its owners.
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This, however, isn't a hard and fast rule.
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There are many big banks coming out
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with innovative online
products that are offering
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even higher interest
rates than credit unions.
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Safety.
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The good news is that your money is safe.
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Whether you choose to deposit it in a bank
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or a credit union, that is up to a point.
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Credit unions are covered by
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the National Credit Union Administration.
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This program provides up to
$250,000 worth of insurance
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per person at each credit union.
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Banks are covered by the
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Federal Deposit Insurance Corporation.
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This insurance program also provides
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up to $250,000 worth of insurance
per person at each bank.
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Even though these are
different insurance programs,
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they still function pretty much the same.
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Just make sure you keep less
than $250,000 at any given bank
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or credit union and your money is safe.
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Convenience.
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The great thing about a big national bank
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is their available all over the country.
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There seems to be a big bank
like Wells Fargo everywhere.
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This can be convenient if you
end up moving in the future.
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If you're banking with
a local credit union
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on the west coast and end
up moving to the east coast,
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you may be forced to switch banks.
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Even though most credit unions
aren't available nationwide,
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many still partner up with
a network of nationwide ATMs
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to provide you with access to cash
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when you are away from home.
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You may even be able to
do your banking in person
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at a shared branch location
with your credit union.
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You could however be charged
a fee for each visit.
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Many credit unions are also online.
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So even if you move, you'll be able to
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access your money digitally.
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Customer service.
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Your local bank and credit union
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are staffed by people
within your community,
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thus there usually isn't
much of a difference
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in the customer service between the two
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if you do your banking in person.
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There could be a difference, however,
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if you need special accommodations.
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The manager of your local credit union
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may be able to give you more leeway
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if you fall on hard times and need to take
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a temporary break in loan
payments, for example.
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Credit unions are designed
to serve their members
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not owners and shareholders,
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so they may be more
inclined to help you out.
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So which one is best for you?
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If you like the idea of being a member
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rather than a customer,
earning higher interest rates
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on deposit accounts and paying
lower interest rates on loans
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then a credit union it
might be better for you.
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On the other hand, if you
prefer convenient banking
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across the entire
country, and a wider range
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of high-end banking
products, then you might want
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to go with a bank.
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These generalities can
help guide your search
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for a new banking institution,
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but it's not always the
case across the board.
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You may be able to find a bank
with a higher interest rate
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on deposit accounts or a credit union
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with a wider variety of products.
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It totally depends on
the bank or credit union
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you are visiting.
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So start with a list of
what's most important to you
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and your financial life
and then base your search
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off of that criteria.
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That way, no matter the bank
or credit union you choose,
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you'll be happy with the end result.
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So that is it for this video.
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Thanks for watching and I
hope you learned something new
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about banks and credit unions.
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If you enjoyed this video, don't forget
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to give it a thumbs up and
also don't forget to subscribe
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to the DollarSprout YouTube
channel for more money videos.
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Leave us a comment down
below and let us know
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if you prefer using a
bank or credit union,
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and we'll look forward to
seeing you in the next video.
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Bye.
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