Banks vs. Credit Unions

A credit union is a non-profit financial cooperative owned by its members that operates similarly to a commercial bank. Credit unions provide deposit accounts, credit, and other financial services to their members in the same way that retail banks do. In a number of African countries, credit unions are referred to as SACCOs (Savings and Credit Co-Operative Societies). Natural-person credit unions (also known as “retail credit unions” or “consumer credit unions”) serve individuals rather than “corporate credit unions,” which provide services to other credit unions.

A bank is a licensed financial entity that can accept deposits and offer loans. Commercial/retail and investment banks are the two most popular types of banks. A bank may offer a variety of financial services, ranging from currency exchange and safe deposit boxes to asset management and retirement, depending on its kind.

Instead of utilising cash, banks have made it easier to transmit money from one location to another by using cheques, bills of exchange, and draughts. Payment by check is less safe and convenient; yet, in the case of big payments, merchants and businesspeople benefit greatly from this option. It highlights the significance of banks in the business world.

Bank vs Credit Union Ownership

The primary distinction between banks and credit unions is who owns them. Credit unions are nonprofit financial institutions. Customers, referred to as “members,” own and control them. Credit unions’ principal purpose is to improve their members’ financial well-being and return earnings to them. Shareholders own and run banks, which are for-profit businesses. Depending on the bank, these investors could be thousands of anonymous stockholders or a few large investors. Banks’ primary goal is to maximise profits for their stockholders.

Bank vs Credit Union Eligibility

The general public has access to banks. Regional banks that operate in a certain area may restrict access to some or all of their banking products to residents of that area. Individual accounts are normally available to anyone over the age of 18 who is a legal resident of the United States.

Credit unions are supposed to confine their customer base to a “field of membership,” or a group of persons who share a common tie. The criterion is relatively simple to meet. As to where you work, where you reside, or your participation in an organisation like a school or a house of worship, you may be qualified to join a credit union. You may also be eligible if a member of your family is.

Bank vs Credit Union Product

The products offered to most customers—consumers who wish to manage personal and small-business finances—will not be limited by their choice of bank or credit union. The essential services provided by both types of financial institutions are nearly identical.

However, specialised goods, such as student loans or trustee services, are more likely to be offered by a bank. Although it never hurts to ask, a smaller credit union may not be able to meet your demands in these areas. Some small businesses have formed alliances with service providers to offer these products to their clients. Banks and credit unions both offer internet banking and smartphone apps for account management, while banks may have more advanced capabilities. Both, however, let you browse your accounts, make deposits using your phone, move money between accounts, and pay bills.

Rates and Fees at Banks vs Credit Union

Both types of banks profit by lending money at higher interest rates than they pay on deposits. Fees are generally another source of revenue for them. Credit unions typically provide lower interest rates and costs. They are not only focused on maximising profits for members rather than outside investors, but their non-profit status exempts them from the same types of taxes that banks are subject to. Credit unions typically offer greater savings and CD interest rates, lower loan rates, and cheaper account fees than banks. Customers may optimize their deposit returns while lowering their loan expenses with this combination.

Investors of Banks

A financial services organisation that acts as a middleman in large and sophisticated financial transactions is known as an investment bank. An investment bank is typically hired when a new company plans for an initial public offering (IPO) or when a corporation merges with a competitor. It serves large institutional clients like pension funds as a broker or financial adviser.

Investment banks are best recognised for acting as go-betweens for businesses and the financial markets. That is, they assist firms in issuing stock in an initial public offering (IPO) or a secondary stock offering. They also help businesses obtain debt funding by locating large-scale investors for corporate bonds. The advisory role of the investment bank begins with pre-underwriting advice and continues after the securities are distributed. Before the securities are available for purchase, the investment bank must examine a company’s financial accounts for accuracy and issue a prospectus that summarises the offering in detail to investors. Corporations, pension funds, other government institutions, financial, and hedge funds are among the investment bank’s clients.

Checking Accounts

A checking account is a deposit account that facilitates withdrawals and deposits at a financial institution. Checking accounts, also known as transactional accounts or demand accounts, are highly liquid accounts that can be obtained using a variety of methods, including checks, automated teller machines, and electronic debits. A checking account differs from other types of bank accounts because it often allows for unrestricted withdrawals and deposits, although savings accounts may have restrictions on both.

Commercial or business checking accounts, student checking accounts, joint checking accounts, and many other types of accounts with similar functionality are all examples of checking accounts. Businesses use commercial checking accounts, which are their personal property. The account is signed by the officers and management of the company, as permitted under the company’s governing papers. Some banks provide college students with a free checking account that will stay free until they graduate. A joint checking account allows two or more people to write checks on the account at the same time, usually married couples.

Conclusion

Most large commercial banks employ checking accounts as loss leaders by charging low fees for them. Most banks want to induce customers to use more profitable products like mortgages, personal loans, and certificates of deposit by offering free or low-cost checking accounts. Alternative lenders, such as fintech companies, are increasingly offering consumers loans, so banks may need to reconsider their strategy. If banks can’t offer enough profitable items to cover their losses, they can decide to raise checking account fees.