If you're looking forward to opening your first checking account, you may be nearly overwhelmed by the different options available. Gone are the days when you'd simply walk into your local bank branch and ask them about their offerings—today, many do their banking without ever setting foot in a physical bank. With online banks, storefront banks, and credit unions, there are options to fit everyone's needs. But is a bank or a credit union right for you? Learn more about some of the major differences between banks and credit unions to help you narrow down your search.
What Makes a Bank Different From a Credit Union?
The main structural difference between these two types of institutions is the existence of a profit motive. Banks are for-profit enterprises, while credit unions are non-profit: any profits are distributed back to the members (i.e. accountholders). Both banks and credit unions offer checking accounts, savings accounts, credit and debit cards, certificates of deposit (CDs), and a wide variety of other products.
Banks and credit unions also enjoy the same protections and safeguards to preserve account value. Bank accounts are insured by the Federal Deposit Insurance Corporation (FDIC), which provides each accountholder with protection for the first $250,000 in deposits. This means that even if the bank fails or goes out of business, your money is safe. Credit unions are insured by the National Credit Union Association (NCUA), which provides essentially identical protection under a different umbrella.
What Factors Should You Consider When Choosing Your Banking Institution?
Banks and credit unions offer different benefits for their users, and there's no one-size-fits-all solution. If you're debating between the two for your first checking account, there are a couple of factors you may want to consider.
The first is the frequency with which you'll need ATM access and the availability of "in-network" ATMs. If you're someone who likes to hit the ATM a couple of times a week to access extra cash, paying out-of-network fees can add up quickly. You'll want to choose a bank that has a broad network of ATMs in the areas you frequent most often.
You'll also want to consider your customer service needs. Many credit unions are local, which provides a greater opportunity for face-to-face interaction with someone from your community. Banks, on the other hand, often have a national presence and you may wind up calling an 800 number for answers to your questions or concerns.Share