Everyday Financial Planning and Wealth Management Tips: Pros and Cons of Credit Unions vs Banks
When it comes to financial planning and wealth management, you have a seemingly endless number of important decisions to make. Picking the appropriate type of banking option to best meet your needs is one such crucial decision you will need to make. As discussed in this previously published Summit Brokerage blog, there are a variety of types of banking entities including but not limited to retail banks, commercial banks, investment banks, and credit unions. When it comes to your everyday, individual consumer banking needs, you have two major banking options: retail banks and credit unions. Both of these banking options likely offer consumer banking financial services and products such as but not limited to: checking accounts, saving accounts, debit cards, credits cards, personal loans, and home mortgages. When contemplating credit unions vs banks, there are a number of factors to consider.
A retail bank can generally be defined as a bank that helps individual consumers with their everyday banking needs and transactions such as withdrawing money from a checking or savings account or depositing a check. A credit union is very similar to a retail bank in terms of the banking services and products it offers to its customers. The biggest difference between a credit union and a retail bank is that a credit union is a not-for-profit, financial institution. Credit unions are also member-owned, cooperative financial institutions, meaning they are owned and operated by its members as opposed to a commercial/retail bank owned by its shareholders.
Here is a cursory review of some of the pros and cons of credit unions vs banks:
- Credit unions are member-owned and operate as not-for-profit financial institutions. As such, unlike banks that operate for profit and have to appease shareholders with revenue earnings, credit unions oftentimes have lower fees, free checking accounts, and no minimum balance requirements. However, you’ll have to check with each credit union and bank you are interested in using to be sure.
- Credit unions often offer higher rates of return on savings accounts and lower interest rates on loans than traditional retail banks. However, this is by no means an absolute—make sure to thoroughly “price-compare” among the credit unions and banks you are considering using.
- Many credit unions offer special discounts (on things such as car rentals or wireless phone plans, for example) to their members. However, these special member discounts vary greatly and are subject to change and availability. Retail banks may also offer its customers similar member-only discounts.
- Credit unions have limited eligibility. Credit unions exist to serve a specific community of people tied together by a “bond of association” such as employer, geographic location, or fraternal organization. For example, you may have a credit union that is only open to membership by employees of a specific county’s public school system or a credit union that only services members of the military and their families.
- Credit unions may have a lower level of technology than traditional, retail banks. Because credit unions often have fewer funds to reinvest in technology, they often have a lower level of technology than retail banks. For example, retail banks are more likely to have advanced mobile and digital banking technology and mobile check deposit features than credit unions. But again, this is on a case-by-case basis so check out the technology features of any credit union or bank you are considering using.
- Compared to retail banks, credit unions typically have less brick-and-mortar locations and less ATMs. Some credit unions will let members get around this limitation by allowing members to use ATMs from a larger, existing network of ATMs and then refund you any ATM fee that the ATM owner may charge you. Be sure to check the policy of any credit union or bank you are interested in using.
Choosing the right banking entity for your banking needs is just one of many financial planning and wealth management decisions you’ll need to make. There’s no need to make these important decisions alone. Working with an experienced financial advisory and wealth management professional will offer you reassurance and expert guidance for your financial future. Summit Brokerage Services has been voted the #1 boutique independent broker dealer in the country. Let us show you why! To experience the Summit difference and learn more about our network of independent financial advisors, visit https://www.summitbrokerage.com or call us at (800) 354-5528.
About Summit Brokerage Services, Inc.
Summit Brokerage Services is part of Cetera Financial Group. Summit Brokerage provides a broad range of securities brokerage and investment services to primarily individual investors. Summit Brokerage also sells insurance products, predominantly fixed and variable annuities and life insurance through its subsidiary, SBS Insurance Agency of Florida. Summit Brokerage also provides asset management services through its investment advisor, Summit Financial Group, Inc.
About Cetera Financial Group
Cetera Financial Group® (“Cetera”) is a leading network of independent retail broker-dealers empowering the delivery of objective financial planning advice to individuals, families and company retirement plans across the country through trusted financial advisors and financial institutions. Cetera is the second-largest independent financial advisor network in the nation by number of advisors, as well as a leading provider of retail services to the investment programs of banks and credit unions.
Through its multiple distinct firms, Cetera offers independent and institutions-based advisors the benefits of a large, established broker-dealer and registered investment adviser, while serving advisors and institutions in a way that is customized to their needs and aspirations. Advisor support resources offered through Cetera include award-winning wealth management and financial planning and advisory platforms, comprehensive broker-dealer and registered investment adviser services, practice management support and innovative technology. For more information, visit www.ceterafinancialgroup.com.
*”Cetera Financial Group” refers to the network of retail independent broker-dealers encompassing, among others, Cetera Advisors, Cetera Advisor Networks, Cetera Financial Institutions, Cetera Financial Specialists, First Allied Securities, Girard Securities, The Legend Group and Summit Brokerage Services.