Thursday, July 18, 2013

Credit Unions vs. "Real" Banks

Seriously.
photo credit: London Permaculture via photopin cc

Read this if: 

1) You don't know what a credit union is. 
2) You want to know which one (bank vs. credit union) you should put money in. 

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I don't have much experience with credit unions. I've heard about them and I've certainly seen them, but I don't have an account with them. After doing some research though, I am ready to find a credit union ASAP. 

What is it? 

A credit union is like a bank, but they are nonprofit and they are usually customized towards specific groups of people (for example, people who work at the same company). I've seen some that didn't have any special requirements aside from you being 18 and a legal citizen of the United States. 

How is it insured? 

We always want to know that our money will be protected. Instead of FDIC insurance (which is what banks have), credit unions are insured by something called the NCUSIF. More information on their website here if you're interested: https://www.dcu.org/streetwise/howto/creditunions.html, but the bottom line is, your money is as safe with a credit union as with a bank. 

Why would I pick a credit union over a big bank? 

There are basically three categories of things to compare between credit unions and banks: 

1) Accessibility: Large banks like the Bank of America or Capital One obviously have more branches and more man power. 
2) Fees: Credit unions tend to have much lower fees because they have lower operating costs. 
3a) Interest rates: Credit unions also tend to have higher interest rates for deposit accounts. Currently, interest rates are low, low, low everywhere, so this is not such an attractive advantage. 
3b) The other interest rates: Credit unions also tend to give lower interest loans. 

So, you're saying open accounts with a credit union? 

I think a credit union is a good option, as long as you know how you will access your money when you need it. I wouldn't drive an hour just to go to a bank, so I would consider locations of physical branches. Not that I ever go to a physical bank. Ever.  As long as it's convenient to get to (with online banking, it's probably just as convenient as a big bank), I would say go for a credit union. 

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Plan of Action: 

1) If you're thinking of opening a checking or savings account, try a credit union! 
2) Here are some well established credit unions to give you an idea of what credit unions tend to offer: http://www.kiplinger.com/slideshow/credit/T005-S001-7-great-credit-unions-anyone-can-join/index.html 

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What experiences have you had with credit unions? Let me know in the comments. 



As always, contact me with questions or suggestions! You can either comment directly on the post or send me an email to moneymattersjoan@gmail.com. 

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