Banks vs Credit Unions

From personal experience, I can share some information as to the understanding of banks and credit unions.
I believe that credit unions & banks both have their pros and cons. I have the added advantage of having professional experience in the management of both types of institutions.

In general, the present day mid-size to large bank is normally more convenient than a Credit Union with respect to hours & locations. Banks also pay more in taxes to the government which allows them a greater ability to expand just about anywhere. With a process called foot mapping, banks can expand faster and this generally allows them to provide convenience for Joe & Jill Customer who work full time and can only get to the bank in the evening or on weekends. Banks generally have a wide array of products and services geared towards both individuals and business owners. Products can range from your basic checking, savings, certificates of deposit….and get more complex with products like investment sweep accounts, brokerage accounts, instant check verification products, wire transmittal access, remote deposit machines, etc. Also, as a for-profit entity, banks generally are more aggressive players in large denomination accounts because of the ability to provide extremely complex and expensive product offerings to help maximize the customer’s bottom line. These costs can be passed on to consumers of their services through aggressive fee targets with respect to NSFs & Uncollected Funds, minimum balance requirements, and other fee generators.

However, in more recent times, Credit Unions have fought to compete against banks by developing partnerships with other Credit Unions and some for-profit banks (usually smaller in size) in order to achieve similar services goals all the while still keeping their costs relatively lower than banks. One key
difference is that all profits from a credit union does not go into a stock price because of it’s non-profit status. Since the tax structure is different from a bank, the excess retained earnings that a profitable credit union makes theoretically goes back into creating more competitive products and service
offerings (i.e. higher rates on savings and lower rates on loans) as well as lower fees. Growth has to be balanced with the ability to differ from banks in some of these key areas. What has made credit unions famous is the ability to really have a personal touch with regards to understanding the needs of the clients they serve and giving chances to those people who normally would not have the opportunity at a bank. The role of the Credit Union is normally more limited than that of a bank, even though many have developed into full financial service institutions. A credit union will apply for what is called a field of membership. In doing so, they extend services to under served communities or a selective group of people in accordance to an approved charter from the National Credit Union Administration and the credit union’s board of directors.

As a result, many people find it as an asset to have financial relationships with both. However, it is up to the individual to find the mixture that is right for them. Some people have a better relationship with their credit union and will have their primary accounts there. Others have great relationships with their local bank and the reverse can be true. In either case, the key is to educate yourself on the benefits and costs of each option and choose accordingly.

If this information was helpful, let me know. If you have any information to add, feel free to do so also. Feedback is always appreciated when constructive.