Community Bank versus the credit union: the main similarities and differences

There is no doubt that large banks are comfortable, as they offer high -tech platforms online and large -scale sub -networks. But in a growing digital world, you may yearn for a banking experience with a local focus and more human communication. If this looks like you, the community bank or the credit union may be appropriate.

Community banks and credit federations have many common denominators, specifically their personal approach to banking services. But they also have great differences when it comes to their structure. These differences can affect your experience as a customer, features and privileges you enjoy.

If you are interested in becoming a customer in a community bank or a credit union, learn about what makes each of these institutions unique before determining the way to go.

In simple phrases, the community bank is a bank that focuses on providing financial products and services, such as deposit accounts and loans, to customers in its local community. This generally means deposits come from loans that are provided to local customers and companies. This also means that these banks have a specialized knowledge of the societies that serve them, allowing them to meet the unique needs of their customers.

Community banks provide many products and services themselves, such as large banks, including checking accounts, savings accounts, deposit certificates, loans, commercial banking services and more. However, they may not have a wide service suite like the largest banks. Likewise, branch networks of community banks tend to be much smaller than national banks.

Due to a narrower focus on a smaller group of customers, community banks can provide more customized customer service. It may also be more flexible when it comes to approval of loans – giving priority to relationships first – while major banks may adhere to strict financial requirements.

Whether there is a broken definition of the Community Bank depends on who you ask. The Federal Reserve defines community banks as banking institutions with less than $ 10 billion of assets, although other definitions focus less on numbers and more on values.

Read more: What is the community bank?

Credit federations provide similar products and services as banks, but they work as non -profit financial cooperatives. Members can open examination accounts and savings accounts, take out loans, obtain real estate mortgages, and reach wealth management – but their relationship with the institution differs from those between banks and their customers.

The ownership of credit federations is owned by its members and its management by the members of the members of the members. In order to take advantage of the Credit Union products and services, you must become a member and open an arrow account – often with a $ 5 deposit – which represents your ownership in the institution.

You must meet specific civil requirements to become a member of a credit union. Often, credit federations serve a specific geographical area, industry, employer, or group, which limits membership for those who meet the specific criteria. For this reason, credit federations can focus on meeting the unique needs of their members, whether it means providing food for old warriors, teachers or residents of a specific society, for example. In addition, credit unions often emphasize customer service and return the beautiful to society.

Because of its non -profit structure, credit federations tend to transfer savings to its members more than banks. These savings may come in the form of interest rates at the highest account of saving or decreasing account fees or low loan prices.

Read more: What is the credit union, and how do you join one?

Community banks and credit federations have a lot of common denominators, but they differ in several main ways. Here are some of the biggest differences between community banks and credit federations:

• Civilization: Anyone can join a community bank and open an account, but you have to become a member before opening an account in a credit union. Membership eligibility usually includes living in a specific area, working in a specific industry, or being part of a specific group.

• building: Banks work as profitable institutions, and customers have no direct impact on the company’s decisions. Credit federations, however, non -profit organizations. Members are parties and can vote on organizational decisions.

• insurance: The deposits are secured in both banks and credit federations up to $ 250,000 for each deposit, for each institution, for each royal category. But different entities secure each type of institution: Federal Deposit Insurance Corporation (FDIC) The banks believe, while The National Credit Union Administration (NCUA) Establish credit federations.

• Fees and rates: Banks tend to impose higher fees compared to credit federations. They may also have higher interest rates in the loan and low interest rates. Credit federations can provide more attractive fees and prices due to its non -profit structure, allowing them to pass savings to members.

• accessibility: Community banks may have more branch sites and ATMs larger compared to credit federations. On the other hand, some credit federations belong to the cooperative joint network, which allows members to access their accounts in any partner bank branch or ATM.

• technology: Banks may be more technically advanced compared to credit federations, as it offers more online banking and mobile applications that are easy to use. But this is not always the case.

Read more: 7 credit unions that anyone can join

Whether the community bank or the credit union is the best for you depends on your goals and priorities and what is available in where you live.

If you are not sure to choose, ask yourself the following questions:

• Is your primary goal to reduce banking and gain more deposits? If so, you may have better luck in a credit union.

• Do you want an opinion on how your financial institution works? If you want the ability to influence decisions in your financial institution, the non -profit structure of the credit union will be appropriate.

• Do you give priority to mobile technology and banking services? Banks are often – but not always – more advanced technology compared to credit custody. If you have an elegant app and online banking platform for you, you may want to choose a community bank.

• Does the bank or credit federation provide all the products and services you need? Banks and credit federations may provide the same products and services, but this can vary according to the institution. In addition, some people give priority to maintaining all their financial accounts within one bank or a credit union, while others may not mind diversification. If you want everything under one roof, choose which one can offer what you need.

• What can be reached in your area? Community banks tend to have more branches compared to credit federations, although this is not always the case. In addition, some credit unions belong to a joint network that allows the bank in any member branch, and expanding your network of branches and ATMs throughout the country.

Read more: Are credit unions safely more than banks?