When you first begin to look at the question, bank or credit union, you may be torn. You may not know that credit union members receive personal service every time they walk into a branch. It’s that personal touch that sets credit unions apart from their banking brethren, but it’s not the only difference that makes credit union membership desirable.
For-Profit vs Non-Profit
Make no mistake – traditional banks are in business to make a profit. They must answer to a well-paid board of directors, who may or may not even have funds on deposit with the bank they control. As publicly traded entities, banks are owned by stockholders who expect to reap generous annual profits. With substantial pressure to reach sales goals, in recent years employees have sometimes resorted to desperate measures to hold onto their jobs. Staffers at TD Bank recently cited their company as having “zero focus on ethics” and admitted that they lied to customers in order to secure their business. The recent Wells Fargo Bank settlement – wherein they agreed to pay out $142 million to disgruntled customers – is just the latest in a long series of bank scandals occurring during the past decade. This alone should answer your question of a bank or credit union!
Credit unions, on the other hand, are member-owned institutions that exist to serve their community. Unlike banks, credit unions are not-for-profit. They are owned and governed by the members they serve, and instead of paying out large profits to a small group of investors, credit unions spread the wealth by offering smaller dividends – plus reduced fees, discounted loan rates, and many other benefits – to their local membership.
The Trade-offs
Nationwide banks have tremendous collective investing power, so they are able to offer a wide range of financial services, from basic savings and checking accounts to complicated investment portfolios. They have a large network of branches and ATMs, and are often on the forefront of new technology. Convenience is a big draw for their customers, and they make it easy by quickly rolling out new apps and other technology. Unfortunately, the cost for all the glam is borne by their customers, who generally end up paying higher fees and receiving lower interest rates on deposits. One frequent complaint from bank customers is that technology often replaces personal interaction; customers have been requested to use courtesy phones inside the branch to speak with customer service rather than interfacing with the teller!
Credit union membership can provide some valuable benefits. First, instead of being a customer, you are a member. Credit unions are formed by people with a common link – the area where they live or work, their faith, their employer, or membership in another group, such as a sorority or professional alliance. With this common bond comes the commitment to provide financial products for one another at the most favorable rates possible. Credit unions tend to offer higher rates on deposit accounts, and lower interest rates on loans. Frequently there are lower fees for services, and sometimes there are no fees at all. Since credit unions cater to smaller groups, it stands to reason that they don’t have as many branches as the larger banks. However, most credit unions participate in share branching – allowing members to transact business at other credit unions in their network. And because credit unions are local, they invest time and talent in their communities, often sponsoring or participating in fundraisers for schools, youth groups, or disaster relief. Achieva sponsors the annual Box Car Rally and the 5k Run for Good to benefit our local schools. Big banks can’t match that kind of personal involvement.
Regardless of the profit versus purpose motive, both types of institutions keep your deposits safe through insurance. Banks provide customers with account insurance up to $250,000 through the FDIC (Federal Deposit Insurance Corporation) while credit unions provide the same $250,000 guarantee through the NCUA (National Credit Union Association).
You’ve always known that you feel special when you walk through the door of your Achieva branch, and now you know why. Achieva employees are dedicated to providing members with the best possible service because we are members too. We invest in our people and our community, and that benefits us all. We hope that this settles all debate between a bank or credit union.
References:
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