Undoubtedly, large banks are convenient, offering high-tech online platforms and wide branch networks. But in an increasingly digital, automated world, you may crave local focus banking experience and more human connection. If this sounds like you, a community bank or credit union could be a better fit.
Community banks and credit unions have much in common, specifically their personal method of banking. But they also have big differences in structure. These differences can affect your customer experience and the features and benefits you enjoy.
If you are interested in becoming a customer in a community bank or credit union, learn about what makes each of these organizations unique before deciding which way to go.
Simply put, a community bank is a bank focusing on providing financial products and services, such as deposit accounts and loans, to customers in its local community. This generally means that deposits come and that loans are made to local customers and businesses. It also means that these banks have specialist knowledge of the communities they serve, allowing them to meet the unique needs of their customers.
Community banks provide many of the same products and services as larger banks, including checking accounts, savings accounts, deposit certificates, loans, business banking, and more. However, they may not have a service room as wide as larger banks. Similarly, the branch networks for community banks tend to be much less than for national banks.
Due to a narrower focus on a smaller customer fund, community banks can offer more service to personalized customers. They may also be more flexible in approving loans – prioritizing relationships first – while larger banks can adhere to strict financial requirements.
Whether there is a cut and dry definition of a community bank depends on who you ask. The Federal Fund defines community banks as banking organizations with less than $ 10 billion in assets, although other definitions focus less on numbers and more on values.
Read more: What is a community bank?
Credit unions offer bank -like products and services but act as not -for -profit financial co -ops. Members can open check and save accounts, remove loans, obtain mortgages, and access wealth management – but their relationship with the organization is different from the bank relationships and their customers.
Credit unions are owned by its members and are managed by a board elected by a member. To take advantage of credit union products and services, you must become a member and open a share account – often with a $ 5 deposit – which represents your ownership at the organization.
You must meet specific eligibility requirements to become a member of a credit union. Credit unions often serve a specific geographical area, industry, employer or group, limiting membership to those who meet certain criteria. Because of this, credit unions can focus on serving the unique needs of their members, whether that means catering to former veterans, teachers or residents of a particular community, for example. In addition, credit unions often emphasize customer service and give back to the community.
Due to their not -for -profit structure, credit unions tend to transfer savings to their members more often than banks. These savings can come in the form of higher savings account interest rates, lower account fees, or lower loan rates.
Read more: What is a credit union, and how do you join one?
Community banks and credit unions have much in common but differ in many key ways. Below are some of the biggest differences between community banks and credit unions:
-
Competence: Anyone can join a community bank and open an account, but you must become a member before opening an account in a credit union. Membership competence usually involves living in a particular field, working in a particular industry, or being part of a particular group.
-
Structure: Banks act as profit organizations, and customers have no direct influence on company decisions. Credit unions, however, are not -for -profit organizations. Members are partial owners and may vote on institutional decisions.
-
Insurance: Deposits in banks and credit unions are insured up to $ 250,000 per depositor, per organization, per ownership category. But different entities insure all types of organizations: the Federal Deposit Insurance Corporation (FDIC) insures banks, while the National Credit Union Administration (NCUA) Insures credit unions.
-
Fees and rates: Banks tend to charge higher fees compared to credit unions. They may also have higher loan interest rates and lower savings interest rates. Credit unions can afford to offer more attractive fees and rates due to their not -for -profit structure, which allows them to transfer savings to members.
-
Accessibility: Community banks may have more branch locations and more ATM networks compared to credit unions. On the other hand, some credit unions belong to the shared network of the Co-op, which allows members to access their accounts at any partner bank branch or ATM machine.
-
Technology: Banks may be more technologically advanced compared to credit unions, offering simpler online banking and easy-to-use mobile apps. But this is not always the case.
Read more: 7 Credit Unions any one can join
Whether a community bank or credit union is best for you depends on your goals, priorities, and what is available where you live.
If you are unsure of who to choose, ask yourself the following questions:
-
Is your main goal of reducing bank fees and gaining more on deposits? If so, you may prefer luck in a credit union.
-
Do you want to say how your financial institution is running? If you want to have the ability to influence decisions in your financial institution, a credit union's not -for -profit structure will be a better fit.
-
Do you prioritize mobile technology and banking? Banks often have – but not always – more advanced technology compared to credit unions. If having the most sleek app and a -place banking platform is important to you, you may want to choose a community bank.
-
Does the bank or credit union offer you all the products and services you need? Banks and credit unions can offer the same products and services, but this may vary by organization. In addition, some people prioritize keeping all their financial accounts within one bank or credit union, while others may not mind diversifying. If you want everything under one roof, choose whichever can offer what you need.
-
What is accessible in your area? Community banks tend to have more branches compared to credit unions, although that is not always the case. In addition, some credit unions belong to a shared network that allows you to bank at any member branch, expanding your network of branches and ATM machines nationwide.
Read more: Are credit unions safer than banks?