What’s Better for You, Banks or Credit Unions?

NO NONSENSE

Pasadena Tech Center, 2015 (Photo – ColoradoBlvd.net)

Banks and Credit Unions (CUs) are similar in the sense of their overall function in the financial market. Additionally, both are insured by the federal government (FDIC and NCUA).

By Elie Boutros

There are key differences between the two that we, as consumers, should be aware of:

1- Banks are for-profit, while CUs are not-for-profit.

This doesn’t mean that CUs do not make money. CUs return whatever profits to their customers with lower fees and lower interest rates on loans.
– Banks, on the other hand, have shareholders and investors they need to satisfy. Plus banks will pay their employees more compared to CUs.

2- CUs are also less bureaucratic.

This means that there is a lot less red tape. Certain exceptions or fee reversals could occur at CUs where you wouldn’t necessarily be able to obtain at a bank.
– Banks have multiple departments and sometimes departments inside of departments. This is apparent when you find yourself on the customer service line being transferred from department to department, trying to resolve one issue.

3- CUs do not have the luxury of providing their customers with multiple branches.

They collaborate with other CUs to service their clients through a program referred to as “shared banking.” All this means is that any CU customer may use any CU ATM or its branch to service his or her account without incurring any additional fees.
– As a bank customer, you must only use its ATMs and branches; otherwise, you will get charged a fee by your bank and the other institution involved.

4- CUs and thus their employees don’t have sales goals, or if they do, they will be miniscule compared to those of banks.

In banks, there are sales goals that have to be met. This means every bank employee will have some sales goal to achieve (including tellers in a branch). Being offered a product in a bank is very different from when you are being offered a product in a CU. One employee has a higher sales goal and a greater incentive at stake, while the other employee does not.

5- CUs are a local resource.

This means that the employee serving you, even the one you are talking to over the phone, probably lives in your county. This usually goes true for all the local vendors the CU will need for facilities, security, and many other services. In a sense, this indicates all your money and business activity is directly supporting your local community.
– When you call a bank’s customer service, it is common to be speaking to an employee who is in another part of the world. (This is related to point 1.) Banks need to make a profit; it is cheaper for them to outsource the call center.

This is not a good vs. bad scenario.

In reality, both banks and CUs are essential for any consumer. If all we had were CUs, things would not be good. Imagine you are in Europe with your assets frozen because a CU suspected it was fraud when you tried using your card in Europe. The CU has local employees operating on local time zones. If it’s Saturday night at 8:00 p.m. local time, then good luck reaching a customer-service representative who can unblock your card before 9:00 a.m. Monday morning. That’s one benefit to banks’ outsourcing their call centers around the world. They will have someone awake at any time during the day. The best thing to do is to have your assets in some combination of the two, in a way that best satisfies your lifestyle.

Elie Boutros has a Bachelor’s in Economics from CSUCI. Most of his career has been in the banking industry. His all time goal would be to one day work in developmental economics on a global scale.