Credit Unions vs Banks
What is the Difference?
Whether you're looking for a car loan, a savings account, a mortgage, or just a little direction with your finances, most people want the same thing: a trusted financial institution that provides competitive products, secure and convenient service, and reliable help with all things financial.
However, most Americans do not believe their bank is prioritizing their best interests. According to the Chicago School of Business publication, Pro-Market, roughly 33% of US consumers do not trust their bank. CNBC reports that most young adults (now emerging as the dominant workforce) do not trust larger banks since the 2008 Great Recession.
The good news is, you have a choice where you bank, and it helps to first know the key differences to giving your business to a bank or to a Credit Union.
Let's Begin with a Little History
There was a time when banks would only allow wealthy individuals to house and borrow money. Banks wanted to protect their investments, which is why we still have a credit worthiness scale today. However, growth comes from investing, which was believed by some to be a right that everyone - not just the wealthy - should be entitled to. Farmers, tradesmen, and business owners deserved the opportunity to invest in their communities to help them and their businesses grow. The purpose of the credit union was to have a cooperative institution so all citizens could enjoy the same necessary benefits from banking. Because local community members looked to credit unions for banking, the success of credit unions became tied to the success of that community. And thus, it was the beginning of a beautiful friendship. Though credit unions, like any industry, have evolved over time, the idea of serving members to better the community has remained the fundamental distinction from banks.
Who Is Looking Out for You?
Important questions to pose (either philosophically or to your financial institution) are: Who do you work for? What drives decision-making? Am I just a transaction or am I a person? You might not always get an honest answer from you bank, because banks answer to shareholders. The job of a shareholder is to make decisions on behalf of the bank, but it's also to make money from those decisions. This means that shareholders are likely to behave in their own best interest. The board of directors for most banks are made up of high ranking executives, usually of other major corporations, who also tend to behave in their own (or company's own) best interest.
Credit unions on the other hand, are a bit more democratic. They are not-for-profit 501c cooperatives, or co-ops, and maintain their own co-op network of financial services. All credit unions are owned by the members who join the institution, and each member is an equal owner or member-owner. The boards of directors for credit unions are elected and voluntary. A credit union is still responsible for making investments, but these investments are intended to make their members' money grow. Profits are made on the interest of loans, and excess earnings are given back to membership though member dividends, or through community involvement.
Your Money, Your Livelihood
You now know the reputation of a credit union is tied to its commitment to the community. Credit unions typically have lower fees on services, and higher dividend rates on deposits. All financial institutions provide loans with interest, but interest is simply the price you pay to temporarily spend money that isn’t yours. It's how growth occurs. However, some institutions hope you never pay off these loans, and often set interest rates so that you never will. At BMI Federal Credit Union, that's not our game. In fact, we believe that financial education is what empowers a community to thrive. Our award-winning Financial Education Program speaks for itself. No tricks up our sleeve; no rabbits in our hat.
We Take Things Personal
While it's certainly impressive to serve tens of millions of customers in dozens of countries worldwide, “personal” may not be the most genuine term to throw around when it comes to service. Though most credit unions typically remain local (or serve a specific community like the Military) and therefore serve a smaller pool of membership , they are regarded for superior customer service. Though larger banks have the capacity to accommodate a large customer volume, they are likely to mitigate customer service through digital channels, including security and fraud claims. These one-size-fits-all approaches can leave you feeling more like a transaction and less like a person.
But What About Insurance?
This is a common question: Aren't banks federally insured and therefore more secure? Not necessarily. Where banks are insured by the Federal Deposit Insurance Corporation (FDIC), credit unions are insured by the National Credit Union Association (NCUA). For BMI Federal Credit Union, additional coverage up to $250,000 is provided by Excess Share Insurance Corporation, a licensed insurance company. In short, credit unions are subject to the same security regulations, so there is no less security risk in trusting them with your hard earned dollars over banks.
Location, Location, Location
You might notice credit union branches are more localized within a particular region. This, again, is because they are invested in the communities in which they serve, so often initial membership requires some kind of initial geographic commitment. This allows credit unions to provide excellent service unique to the members within that community. However with remote banking and shared branching, sharing a zip code with your branch is no longer necessary. BMI Federal Credit Union, for example, maintains competitive, secure, and convenient remote banking services that allow you to complete all your daily banking needs wherever you may roam. If you do find yourself far from home and in need of a branch, Co-Op Financial Services ensure you experience no interruption to the excellent service you'll come to expect. BMI Federal Credit Union members have access to nearly 30,000 ATMs, and shared branching with more than 5,600 locations nationwide.
Voted #1 Best Local Credit Union
At BMI Federal Credit Union, we love our members and our community. With all they've given us over the years, they also voted us #1 Best Local Credit Union in central Ohio for three consecutive years (2018, 2019, and 2020). Why? It's our Member Service. Whether you're new to the credit union game, or been a loyal member for years, we are lucky to have you in our central Ohio community. If you need help at any point of your financial journey, explore our website, visit a branch, or call us at 614.707.4000.
BMI Federal Credit Union was voted #1 Best Local Credit Union for three years in a row by the Columbus Dispatch community-wide poll, the CBUS Top Picks.
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