Big banks get the blame for the financial crisis and all the other recent horrors,from the foreclosure mess to the JP Morgan Chase trading gaffe. Yetfor most people, big banks are most culpable for their high fees and poor service.
Luckily, there are alternatives. Credit unions, for instance. Let’s compare them:
What makes them different? Large commercial banks are owned by their shareholders and of course are a for-profit business, while credit unions are owned by their depositors and are not-for-profit. That does not mean that the credit unions are not profitable (i.e., revenues exceed expenses) rather they seek to plow their excess earnings back into the business for the benefit of the depositors, also known as members, owners and shareholders.
Both institutions have deposit insurance up to $250,000 per account. For banks, this is through the government’s Federal Deposit Insurance Corporation (FDIC); for credit unions, the National Credit Union Administration (NCUA), also a federal agency.1
Traditionally, commercial banks made a profit by lending depositors’ money to borrowers at greater interest than they pay to the depositors. Today, they make most of their profit through investment transactions, commissions, penalties and an ever-growing list of customer user fees. axis bank deposit slip
Credit unions pledge to put customer service before profit motive. They are structured just like banks except their boards of directors are typically made up of volunteers elected by the membership. Banks offers their services to the world at large; credit unions offer services only to those meeting eligibility requirements. You may qualify to join a CU because of your employer, your industry, a union or guild membership, a family member who has obtained membership, or even your home address.
Virtues and Vices of Scale. Now large banks have some clear advantages due to their scale. They offer many ATMs (some in foreign nations) and their branches are plentiful. They have many product offerings, and mortgage rates may be lower than at a CU. Sometimes, the large banks pay you cash bonuses just to sign up for products, like checking accounts with direct deposit.
Many credit unions offer better interest rates on checking, savings and money market accounts, and on long-term certificates of deposit. Fees on credit cards and terms on auto loans typically are much better, too.