Tag Archives: Banks

Personal Finance 101 – Banks vs. Credit Unions

When the time comes to open a savings or checking account, most people don’t realize the impact of their decision, or the number of options they have in the process.  While most people will go to the bank that their parents patronized to open their accounts, there are many better options out there,  and often there is quite a bit to be gained from joining a credit union  over patronizing the bank.

Go back and read that last line again. Notice the difference in wording?  This is a very important difference, because when you are part of a credit union, you own part of the nonprofit entity, whereas with a bank, you are paying them to provide you with a service. Don’t believe me? Call up your local Wells Fargo, Chase, or Bank of America branch and ask them what the interest rate on their free checking accounts are.  The answer is easy: It’s 0.00%. When they offer interest, it’s normally with an average daily balance of $5,000 or more. Contrast this with a credit union, and it’s easy to find free interest checking accounts with a rate of 0.5%  up to 4% .

On the flip side, look at loan rates. You’ll often find better interest rates at your credit union than you would at a bank, including single-digit interest rates on your credit cards, as well as car loan rates  under half of what you could find at a dealership (depending on credit).  By combining these two, you’ll save more in the long run, earning interest on your deposits, and pay lower rates on the money you borrow.

Bank

Credit Union

Ownership

Stockholders

Members of the community

Interest on Checking

0.00% (some rare exceptions)

0.1%-4.0% (Varies by area)

Credit Cards

Retail Rates, Up to 29.99%

Average between 8-17%
Auto Loans

As low as 3.59%

As low as 2.79%

 

As you can see above, credit unions win out on the major categories for financial services.  One place where banks can have an edge, however is nationwide availability. It’s quite easy to find Wells Fargo branded ATMs on the east and west coast, and while you can use the ATM, you usually will be charged a fee by its operator. As a result, many credit unions will offer ATM fee refunds when you meet the qualifications for their interest checking (normally 10-15 debit card transactions, electronic statements, and direct deposit each month), making them a bit more appealing at the end of the month.

Overall, moving your finances to a credit union is one that makes sense for your wallet. You can even find some that have less-frequently seen features like free coin counting, and even student loans at better interest rates than you might see elsewhere.

Until next time, go find an interest rate you can sink your teeth into!