It really wasn’t until I began working on TeensGotCents that I started understanding better what a credit union is and how it is different from a bank. On the surface they seem pretty much the same. They both offer savings and checking accounts, credit cards, ATM cards, all the basic things you would expect.
The biggest difference is that a credit union is owned by its members (anyone who has an account at the credit union.) Banks are owned by investors. These people expect to earn money in dividends from the bank. Since a credit union doesn’t have to pay anything to investors, it offers its services for a lower fee and also offers higher interest rates when you have a checking or savings account with them.
Another good thing about credit unions is that if you have to take out a loan, you will pay a lower interest rate than at a bank. This is one of the main reasons my parents have been members of a credit union for so long. They bought two homes and two cars through a credit union because the interest rates were so much lower than those at a bank.
One thing that could be seen as a drawback is that credit unions are not nationwide. Many banks are nationwide, and that means finding a branch or and ATM machine will be easy even if you are traveling. Credit unions have found a way to work together to solve the problem. You can access your account from pretty much any other credit union in the U.S. and even in some foreign countries. Credit unions are ‘shared service centers’ – this means you can go into almost any credit union and have complete access to your account
You can also do most of what you need to do online, including transferring money, checking on your account balances, paying bills and such. You can even deposit a check straight from your smartphone at 121! I’m not sure there is a huge need to even go into a branch in the first place. But that’s just me. I guess you would need to go in to get your account started but that’s about it!
A year ago I opened an account at 121 Financial Credit Union. You can read all about my experience here. You should definitely check out a credit union near you if you have plans to open a new account or move your existing accounts from a bank!
Having an account at a credit union means that you will pay less in fees, earn more interest from your accounts, and pay less interest if you need a loan. Three very good reasons to go with a credit union instead of a bank!