Deciding where to do your banking is a crucial decision to make for your financial future. It will influence the convenience with which you can access your money, what types of perks and benefits are available to you, how quickly your savings can grow and accumulate interest, and more. Before you start looking at individual bank brands or branches, though, it may be wise to answer a few more macro questions. Specifically, would you be better off opening your checking account and/or savings account with a credit union or at a traditional bank?
Understanding the Difference Between Credit Union and Bank
What is a credit union? What is a bank? What is the difference, and what implications do those differences have for you, your family, and your finances?
Credit unions and banks are both forms of financial institutions. This fact leads many people to talk about credit unions and banks as if the two were synonymous. In reality, though, there are significant differences between these two types of financial institutions that can affect the consumer experience at either.
Because “bank” is the more commonly-used term, let’s start by delving a bit deeper into what a bank is. Try to think of a bank as a business or enterprise. Said another way, a bank is a for-profit institution. Many banks—such as JPMorgan Chase, Bank of America, PNC, and Wells Fargo—are large, publicly-traded corporations. As a result, these banks have to answer to their stockholders and are driven by a priority to maximize profits for those stockholders.
Credit unions are different. A credit union is a not-for-profit financial institution that is owned and operated on a cooperative basis by its members. These members are the people who have accounts with the credit union. They are both the customers and the owners. As a result, a credit union is driven first and foremost by a priority of providing superior financial services to its members. The credit union exists to benefit its stakeholders, just like a bank; the difference is that a credit union’s stakeholders are its customers, whereas a bank’s stakeholders are the people trading stock in the company.
The Benefits of a Credit Union
Because credit unions are distinctly different from banks in structure and organization, they also offer distinct benefits. As non-profit institutions, credit unions can focus squarely on delivering the most value to their customers. There are no owners, executives, or stockholders who are focused on padding their paychecks in whatever way possible. Credit unions do have their boards of directors, but those boards are made up of members who have volunteered for the responsibility. They are driven by the same wants and needs as all other members, which means that credit unions tend to do a terrific job at acting in the best interests of their members. Moreover, each member of any credit union has voting rights and can play an active role in the decision-making that drives that institution. Members vote to elect the volunteer board of directors and have a voice on other issues as well.
All these factors help pave the way for the significant benefits of a credit union. The biggest of those benefits is that any profits from the credit union are funneled back toward the members. Since there is no need to pay executives or send dividend checks to stockholders, members benefit in the form of higher interest rates on savings accounts, more equitable rates on loans, lower fees for credit cards or other accounts, free educational programs to help members learn smart financial habits, and more.
In most cases, you can enjoy these benefits without sacrificing any of the primary financial services that you would be able to get from a traditional bank. For instance, at Resource One Credit Union (R1CU), our members can open savings accounts or checking accounts (which we often refer to as “spending accounts”). Money Market accounts, youth accounts, Certificates of Deposit (CDs), and IRAs are also available, as are business checking and savings accounts, business credit cards, merchant accounts, and more. Our services also include a full range of borrowing options, such as mortgage loans, auto loans, loans for business purposes, or credit union personal loan options, for anything from loan consolidation to building credit.
Specific credit unions also have programs or services that are unique to them. Here are just a few of the unique offerings that we can bring to our members at R1CU:
- Innovative youth accounts: Our youth accounts offer fun and useful ways to teach your kids about savings. Take our Roary’s Den Savings Account, which includes a rewards program component to get children under the age of 12 excited about saving money.
- Auto and home coverage: We can help our members get competitively-priced and high-quality insurance coverage for home or automobiles. These benefits also include opportunities for extra coverage that goes beyond what a typical home or auto policy can do. Some of these benefits, such as Guaranteed Asset Protection or Dent Guard protection for your vehicle, are offered in similar formats by auto dealerships, but at more expensive rates. Click here to learn more about these benefits.
- R1 Cha-Ching perks: In addition to insurance benefits, our members also enjoy access to a unique perks package called R1 Cha-Ching. R1 Cha-Ching includes services for credit monitoring, identity theft protection, payment card fraud resolution, roadside assistance, and more.
- Discounts and savings: Through R1 Cha-Ching and other programs, our members can enjoy discounts and savings on pharmacy spending, vision and hearing exams and care, TurboTax products, health services, Sprint, Six Flags amusement park, tickets and events at the Allen Event Center (in Allen, Texas), and more. We even offer a local deals program to save at retailers, restaurants, or other businesses near you.
It is also essential to know that your money is just as safe with a credit union as it would be with a national bank. Both types of financial institutions carry deposit insurance to protect their accounts and account holders—albeit, through different organizations. Banks are insured by the FDIC (the Federal Deposit Insurance Corporation), while credit unions are insured by the NCUA (the National Credit Union Administration). Both FDIC and NCUA insure each account in a bank/credit union up to $250,000.
A Note on Credit Union Locations
If you are leaning toward joining a credit union rather than depositing your money in a traditional bank, it’s important to think about geography. Where many banks are nationwide and have branches in many American cities or towns, credit unions tend to be clustered in and around more specific geographic locations. Googling “credit unions near me” or something similar will help you find a credit union with a branch that you can visit near where you live or work.
At Resource One, we are proud to offer nearly a dozen different branch locations to serve our members as conveniently as possible. As is the case with most credit unions, though, we do have geographical centers: one in Dallas, Texas and the other in Houston. In and around these cities, you can find R1CU branch locations. In the Dallas area, for instance, you might be glad to know there is a Resource One Credit Union in Irving. If you are in the Houston area, you can visit Resource One in Oak Forest, Spring Cypress, or on Jones Road.
Benefits of Choosing a Bank
While credit unions are preferable to banks for many reasons, there are a few advantages to choosing a traditional bank—particularly a large bank with a nationwide presence. As discussed above, credit unions are typically regional financial institutions, which means you won’t find branches everywhere. If you want to enjoy access to in-person or ATM banking anywhere, and wherever you go, you will likely need to choose a national brand such as Chase or Bank of America. While these banks are for-profit institutions, they are also accessible institutions.
The other oft-cited benefit of banks compared to credit unions is their embrace of state-of-the-art banking technology. Because of their size, resources, and visibility, these banks are expected to be at the forefront of the financial services world. As such, they are usually the first ones to start experimenting with new technologies or to roll out tech-savvy features or apps. For instance, JPMorgan Chase is currently looking into blockchain—the technology behind cryptocurrencies—which has the potential to revolutionize banking, especially in regards to international transactions. Major banks will lead the way on blockchain adoption, and credit unions will likely follow later—the norm with new tech developments in the banking sector.
That’s not to say that credit unions are in the banking dark ages, though. On the contrary, at Resource One, we have embraced numerous new technologies to make life easier and more convenient for our members. One example is our remote deposit capture feature, which allows R1CU members to deposit their checks via a mobile app. This type of functionality is commonplace at bigger banks but isn’t necessarily available at all credit unions. In general, we try to keep tabs on new technology developments in the financial/banking industry, adopting the ones that we think will benefit our members most significantly.
How to Join a Credit Union
To take advantage of the benefits of a credit union, you must first establish membership with that credit union. Different credit unions have varied requirements for membership. At Resource One, here are the steps that we require prospective members to go through to establish credit union membership:
- Establish eligibility: We want to make sure we only accept members who can conveniently use the services we provide. As such, we require an eligibility step to ensure that member applicants are in our geographical footprint. You can join R1CU based on where you live, where you work, or where you have family associations.
- Provide key information: We will need you to provide a few key pieces of information for us to process your application. These details include name, phone number, email address, and physical mailing address.
- Open your account: Decide which account you wish to open and meet the initial deposit requirement to become a member. For instance, a savings account with Resource One Credit Union carries a minimum deposit of $25. Spending accounts or other accounts may have different minimum deposits. We do not require any membership fees or dues beyond the initial deposit.
Are you interested in applying for credit union membership with R1CU? Click here to get started.
Banks offer some advantages that you can’t get through a credit union—namely, location flexibility. However, the fact is that credit unions trump traditional banks in most areas that matter most to the average consumer—from savings account interest rates to mortgage loan rates, all the way to simple day-to-day customer service. Joining a bank means becoming part of that bank’s bottom line. Joining a credit union means becoming a part of a family that is driven by a mutual goal for prosperity and financial success. As you make strides to save money, to teach your kids about money, to reach financial goals, and to establish financial security, you are going to get more support from your credit union to achieve those aims than you will ever get from a traditional bank. If you are ready to get started, or if you have any questions about the benefits of Resource One or credit unions in general, feel free to contact us today.