Apr 28, 2023 / Local Utah
You can put your money almost anywhere: in a bank, in a credit union, in a shoebox, under a mattress, or even in a one of those metal briefcases that you handcuff to your hand like in the movies. But as most people make a decision about what’s best for their money, handcuffs and heavy metal accessories usually give way to a considered conversation about banks and credit unions. Which begs the question: What’s the difference between a bank and a credit union anyway?
While much of what banks and credit unions do on a day-to-day basis is similar, the one major differentiating factor is who they do it for. Banks are for-profit institutions. They make decisions in the best interest of their business and shareholders, which means they make money at the expense (literally) of account holders. This usually comes in the form of higher fees and lending rates, and lower rates of return on savings.
Credit unions, on the other hand, are nonprofit institutions made by the people, for the people. They make decisions that are in the best interest of their member-owners, which is why you can usually find better rates and fewer fees at a credit union. It’s also why some big banks participate in riskier practices—to maximize the money of their shareholders—as opposed to credit unions that answer only to their members.
As a member-owned institution, your credit union should be highly invested in your community. When you deposit your money in a credit union, you’re banding together with like-minded members of your community to lift each other financially. Your deposits not only earn better returns on average, they’re also helping you and your neighbors to find more affordable mortgages, car loans, and small business loans.
Alternatively, big banks are more likely to invest your deposits out of state, out of the country, or even in other big banks. The money your bank makes from your deposits isn’t going back into your community, or even back to you by way of more affordable products and better returns. It’s going into the pockets of big bank owners and shareholders.
As you decide where to put your money, it’s not only important to consider how your financial institution treats your money, but how they treat you. A credit union’s officers, management, and employees are all fellow member-owners, just like you. They’re your neighbors, not some nameless, faceless big shots behind a big bank logo. That means you can usually find better service, including locally serviced loans, at a credit union. When you have a question or need to speak with someone, you don’t have to put up with layers upon layers of big bank bureaucracy. You can make a quick call or stop by a local branch to speak with someone in person.
Where you put your money is up to you, but it’s important to find a good financial fit with your bank or credit union. Do some research. Discover where your deposits are going, what rates you’ll be getting, and what kind of service (and community involvement) your bank or credit union provides. Ultimately, your financial institution should be a reflection of your personality, not just a place to stash your cash.