When it comes to banking, there are two main types of financial institutions- big banks and credit unions. Big banks are national and regional-based for-profit institutions that provide profits to their shareholders while credit unions are local and community-based institutions that function through the support of their members. Both offer similar products and services but there are several benefits to choosing a credit union over a big bank.
How They Compete
Credit unions typically have much lower fees than big banks because they are not-for-profit institutions. Any profits earned is reinvested back into the credit union or given back to the customers in the form of lower interest rates on loans and higher interest rates on savings accounts. For example, a recent study found that the average overdraft fee at a credit union is just $12 compared to the $34 charged by the big banks. This can make a big difference, especially for those who are struggling financially.
In addition, credit unions offer a more personal level of service than big banks. Because they are local and community-based, staff at credit unions often know their customers by name and can provide them with tailored advice and assistance. This is in contrast to big banks where customers are often seen as just a number.