by: M. Afsheen Noorbakhsh
People have always asked the question: Which is better, a bank or credit union? In this article, I will attempt to differentiate between the two in an objective manner. Naturally, there are pros and cons to each, and the final decision is simply a personal one. Either way, there are significant differences you should know as to whom you should use as a primary financial institution. This will be a simple overview.
A major difference between a bank and a credit union is the business structure. The larger banks, such as Wells Fargo or Bank of America, are some of the biggest companies in the world and are leaders in the financial sector. Banks have incredible reach, with thousands of branch locations across the nation. For example, Wells Fargo has over 8,700 branches and 13,000 ATMs across the country.
Credit unions are significantly smaller in size and are structured to serve a particular region, city or group, such as members of the military (e.g., PenFed), or employees of a particular state (e.g., NCSECU). Latino Community Credit Union (LCCU) has only 12 branches in North Carolina. However, just because most credit unions have fewer branches does not mean they cannot have a similar reach as the big banks. Many credit unions join a network designed to expand the reach of credit union ATMs. For example, Navy Federal Credit Union members have access to over 52,000 ATMs nationwide.
Another difference is that banks are in business to make profits for their shareholders. A shareholder’s voting power is based on how many shares held; therefore, the largest shareholders have the most power.
Conversely, credit unions are nonprofit entities, and customers are considered members. A member’s voting ability is not based on how much money is deposited. Each member gets an equal vote, which can directly impact the leadership of the credit union. Some credit unions are also very specific on who can apply for membership. Others have an open membership that requires a membership fee.
When comparing the two structures, most consumers are under the impression that credit unions cannot service the public like a bank. Banks have more locations, which is good for customers who like in-person service by visiting any branch location in the nation. Credit unions have considerably fewer locations than most banks, but branches are located in close proximity to most members.
Banks are beneficial for consumers looking for a financial institution that offers a wide variety of products and services. Banking clients are not as concerned with low fees and rates but are more concerned with the convenience of nationwide branches and more advanced online and mobile technology.
Credit unions are for consumers looking for a financial institution with basic banking products and services. But with less variety. Credit Unions are for individuals where lower fees and lower interest rates are a high priority, and the overall number of branches is not a primary concern. Also, credit union members typically experience more personalized customer service when visiting a branch where the employees know their name.
So, which is better? The answer falls in the eyes of the beholder. As a consumer, one must evaluate his or her needs and decide which financial institution is the best choice for various services. One can also consider having certain types of accounts at a bank, and other types of accounts at a credit union.
Sometimes the answer isn’t about financial products as much as social responsibility. There is a clear difference between a not-for-profit, membership driven organization, and a for-profit entity. However, deciding upon the best option(s) is entirely a matter of your personal needs and preferences in relation to the financial services that may be available to you.
Mohammad “Afsheen” Noorbakhsh is a Financial Service Officer at Latino Community Credit Union, Entrepreneur, and family man. Afsheen is also currently enrolled in the Master of Entrepreneurship Degree Program at Western Carolina University. Webmasters and other article publishers are hereby granted article reproduction permission as long as this article in its entirety, author’s information, and any links remain intact. Copyright 2017 by Mohammad Afsheen Noorbakhsh.