Deciding where to put your money for savings or mortgage can be a difficult decision and can mean $1000’s of dollars of difference over the lifetime of the loan or savings plan. So who is the better choice with you money – A credit union or a bank?
For the last two years mutual credit unions have been able to call themselves ‘banks’ officially as ASIC has made it easier to apply for a banking license. The government wanted to banish the myth that these unions (credit unions, building societies, mutual banks) are not as safe as the larger banks to use.
But with everything coming under the one term now without unions changing their ownership structure, what does it mean for you? It means that the competition is better. Mutual banks/unions often have lower interest rates, and the bigger banks tend to offer better services, and these are now competing for your business!
Banks operate with profits in mind; they have a large amount of customers and are owned by stockholders who also run the business.
The advantages of having you money with a traditional bank include –
• They provide lots more services to meet the high number of customer needs
• They offer 24/7 customer service options such as online banking and support
• Customers have the advantage of using one bank for all their banking needs
• They are insured with the National Credit Union Administration so funds are well protected
• ATM’s and branches are never hard to find due to their size
Some of the down sides of traditional banks –
• They can charge higher account keeping fees and higher interest rates as they are after a profit
• They are larger in size so service can feel impersonal
• Your savings earn a generally lower interest rate
Credit unions, mutual banks, building societies
These guys are run without profits in mind; they are a financial institution with the needs of its members in the forefront. They are usually owned by the members themselves, who are also the customers.
The benefits of banking with them include –
• Their services are specialised to the members
• They offer better interest rates on savings, credit cards, and loans
• As they are smaller they are more local and can provide a more personal service
• The customers have the right to vote or elect directors of the board and have a say in how they operate
Things which may deter you from using a mutual institution can include –
• They have fewer assets so they cannot always offer the variety of services as the larger banks and not always 24/7 support
• The ATM’s and branches are not as common as the larger banks
• You may not be eligible to join one as they usually operate within industries such as teachers and nurses. They are community based, so you usually need to be working for the community to join one.
Comparing the two
Generally rates for credit unions, mutuals and building societies are approximately 1% lower in interest rates for home loan products than the big banks. This can save you thousands in home loan costs and slash years off the mortgage.
If you are refinancing, consolidating, and searching for the most competitive rates, the mutual credit unions are the way to go. The problem lies in who can join the institution. Once you are able to join, it is a matter of if you do not mind walking further for the ATM, or not having all the service options available to you all of the time.
The bigger banks are certainly more convenient and if you are not confident with the credit union then a traditional bank will provide you with the security you need. You will get what you pay for with bank as your money will be insured, you will get the services you need at your fingertips, and you can have all your banking under one roof.
At the end of the day, it is your choice where you place your money and depends on your own financial situation and personal preferences. If you feel you need help with your finances or debt help, please contact Life After Debt today and we will help you make the right choices.
Source: Yahoo! Finance