The services that banks and credit unions provide are similar, and both of them offer benefits for borrowers as well as account holders. However, the latter is a non-profit entity where individuals put their money together to provide services and loans to their fellow members. You need to qualify to be able to join.
Credit unions provide services that are geared more toward meeting their members’ needs than driving profit. Each member has a voting share in matters no matter how small his or her holdings may be. While these establishments are subject to federal regulations as are banks, they can often offer lower fees and higher interest rates. And since they are smaller, they are often able to provide more personalized customer service.
Just because a credit union is a non-profit entity, that doesn’t mean it can’t earn a profit, of course. In order to survive, it has to make money. However, they will share more of the profits it makes with its members. It does not have the pressure to make money off its customers, as does a larger financial institution. As a result, they typically offer free accounts without a minimum balance required. Some of them are regulated in a way that the interest rates they charge on credit cards and loans cannot go over a set rate.
The smaller size of credit unions, however, also means that they have fewer ATMs and branches, and may also have fewer online banking options. Banks, on the other hand, have 24-hour customer service by phone and, in most instances, many more Internet options.
Because banks are larger, they can usually offer more variety to their account holders in terms of loan and account services. The larger the institution, the more account and loan options they can offer. They also provide a wide range of investment services as well and can be reached no matter what the time of day or night.
The answer as to whether small or larger institutions are better really depends on what your needs may be. If you are interested in purchasing a certificate of deposit or you’re looking for a loan of some kind, you should include both in your search. If you are looking for a few money market investments and a mid-size loan or two, then the smaller institution can more than likely provide you what you need. If you have a large portfolio, then you may be better off going with a larger institution.