Extensia Financial Explains the Difference Between a Credit Union and Bank
Extensia Financial has more than two decades of experience providing participation loans to credit unions and their borrowers. With such extensive experience working with credit unions, Extensia understands the major advantages such institutions offer. In addition to exceptional customer service that aligns with Extensia’s, credit unions provide top-tier benefits to their members, ranging from lower fees to greater returns.
Credit Union Definition: What is It?
The World Council of Credit Unions defines credit unions as “a customer/member-owned financial cooperative, democratically controlled by its members, and operated for the purpose of maximizing the economic benefit of its members by providing financial services at competitive and fair rates.” The business model is fairly simple: members pool their money together by buying shares in a cooperative to provide loans, checking accounts, savings accounts, credit cards and other financial products.
What to Consider When Choosing a Bank or Credit Union
When choosing a bank or credit union, there are several factors to consider:
- Structure: Banks are for-profit financial institutions while credit unions are not-for-profit.
- Deposit Account Rates & Rates on Loans: Traditionally banking typically has higher interest rates.
- Deposit Insurance: The Federal Deposit Insurance Corporation (banks) and the National Credit Union Administration (credit unions) insure up to $250,000 per account.
- Customer Service: Because credit unions are community centric, they typically offer more personalized customer service.
- Physical Locations: National banks offer more branches than credit unions, which are often more locally focused. However, many credit unions are members of the CO-OP Shared Branch network which allows members of one credit union to perform a range of transactions at another credit union.
- Technology & Convenience: Although bigger banks are often quicker to deploy new tech, credit unions have caught up to providing convenient apps and banking solutions.
Which Is Better: Bank or Credit Union?
Overall, credit unions offer more personalization, greater control and higher returns than banks.
Because credit unions are member-owned, you become a part-owner, meaning you have a voice in how the institution is managed. Members often derive meaning and feelings of connection from being a larger part of a credit union because they share a common bond. This bond is also known as a “field of membership,” which specifically defines a credit union’s eligibility requirements. At some credit unions, eligibility may be based on a shared employer, geographic location or membership in a particular group, such as a school, labor union or place of worship.
As a nonprofit organization, credit unions return all profits to members in the “form of reduced fees, higher savings rates and lower loan rates.” In the spirit of being a nonprofit, credit unions also get involved with the community by providing financial education, building in-school credit union branches and assisting with small business needs.
Banks are led by corporate owners who expect a certain return on their investment, which can lead to higher interest rates and transaction fees. These financial institutions are also less likely to make exceptions or waive fees. Banks typically offer lower annual percentage yield (APY) on savings accounts.
Because banks are typically national corporations, they don’t offer the same personalized services credit unions are known to provide. With banks, it may be difficult to get in touch with live customer support by calling their 800 number and—when you have reached them after a lengthy time on hold—they likely aren’t forthcoming with financial education or resources. In comparison, credit unions typically have real people at the other end of phone calls, supplying customers with educational resources and information on the latest rates and accounts.
At a Glance: 9 Reasons Why You Should Use a Credit Union
- Member-First Ideology
- Higher Returns on Resources
- Lower Interest Rates on Credit Cards & Loans
- More Likely to Work with Poor Credit
- Free Checking Accounts
- Lower Fees
- More Personalization & Ease of Service
- Online Banking Options
- Educational Resources
About Extensia Financial
Established in 1998 and headquartered in Simi Valley, CA, Extensia Financial offers competitive and collaborative commercial loans. We partner with credit unions and brokers, and connect them to investors across the United States. Additionally, we uniquely support and guide our partners through the entire full lifecycle of loans. Extensia Financial is a proud member of the AVANA Family of Companies.