Banks vs Credit Unions

This is a guest post written by Erick Peck - BECU Retail Market Development Specialist.

Making a decision about where to bank can be a frustrating and complicated process. For one thing, there’s the question of trust. Given that half of the world’s population is under 30 years-old, and the financial crisis is only ten years behind us, many young people (especially) are wary of banks. Only 28 percent of the 30,000 millennials who responded to a 2018 WEF Global Shapers Survey agreed with a statement about the honesty and trustworthiness of banks.

Whether you agree or disagree with statements like the one presented in the survey, you’re less likely to be disappointed in your banking experience if you’re informed about financial institutions, how they work and what they offer.

I’ve put together some information that can assist you with making more informed decisions about banking to support your needs!

Banks vs Credit Unions

Banks are generally set up as for-profit businesses owned by shareholders, the owners of the bank’s stock. Banks then serve customers by providing financial products and services. These two groups, shareholders and customers, are largely groups of different people. Banks conduct business to maximize the value of their stock. This can create an incentive to increase revenues by taking advantage of, or at the expense of, customers. For this reason, banks must always monitor to ensure that customers are protected and that this incentive does not result in shareholders taking advantage of customers through unfair, deceptive or abusive business practices.

Credit unions are not-for-profit cooperative organization with members who are both the primary beneficiaries of the organization’s capital and its customer. In other words, in credit unions, members play both roles of “shareholder” and customer. There are not two groups of different people. This eliminates the incentive of one group to maximize value at the expense of the other, and reduces the incentive for behavior that is unfair, deceptive or abusive. Instead, this single group of members seeks to maximize the value they receive from the cooperative credit union as members. As a result, it is typical to find lower loan rates, higher deposit rates and fewer fees at credit unions than at banks.

Choosing the Right Financial Institution

1. Decide What’s Important to You

Do you want your money to earn a higher rate of interest? Are you looking for good loan rates? Are you hoping to avoid fees? Check to ensure that your financial institution offers the products and services you need.

2. Get Clear on the Fees

A lot of banks and even some credit unions advertise “free checking,” but in reality the accounts are only free if you meet certain requirements. Some institutions have balance requirements that require you to maintain a minimum monthly average balance. if you keep a minimum balance of $500 in your savings, the account is free. Get clear on the balance requirements of a financial institution before opening an account.

3. Location Counts

Most people I know end up choosing a bank or credit union because it’s close to their home. But if you think about it, how often do you really need to go into a branch to do your banking? What if you move some day? If you’re comfortable with online services, like online/mobile banking and mobile check deposits, pay attention to those services – they’ll go with you if you move!

What about convenient ATMs? You may think of a Credit Union as only having a few ATM locations, but did you know that most credit unions are part of a system called “The Shared Branch Network?” As a Credit Union member who is part of that nation-wide network, you can use all other in-network ATMs for free. If you do find yourself having to use an out-of-network ATM, many credit unions will waive some of your ATM fees.

4. Less Than Average Credit Isn’t Always a Deal-breaker

In my sixteen years in the financial industry, I’ve seen that this is one of the biggest misconceptions out there. Generally speaking, your credit will only be considered if you are trying to apply for some type of credit product, like a credit card or an auto loan. You don’t have to have amazing credit to have a savings/checking account at a credit union.

5. Beware of the Offers

Have you ever received an offer in the mail or online saying “become a XXXX Bank customer and we’ll give you $300?” Who wouldn’t love to have an extra $300? When you get these offers, it’s important to pay attention to the requirements. Can you afford to maintain a balance of $5,000 in your savings account? If not, is the bank going to end up charging you a $30 monthly maintenance fee as a result? Will an unexpected $30 fee make you overdraw your checking and get an additional $45 overdraft fee?

Some offers you get are reasonable, but not all offers are created equal. Do some research before getting reeled in by an offer.

If you’re thinking of starting up with a new financial institution, take a look at BECU’s offer here (and yes, of course, do some research or feel free to contact me with questions). The requirements of the offer are listed clearly on the flyer and BECU savings/checking accounts do not have any monthly/annual maintenance fees.

If you have any questions about banking, credit unions or BECU’s offer, please contact me at Even if you end up choosing a different institution, I’m happy to help make sure you’re on the right track to making financial decisions that work best for you!