Ask Money

Banks vs. credit unions

Chris Farrell Jan 8, 2010

Question: I was looking into opening a new checking and savings account. I noticed that Credit Unions offer better Interest Rates and Lower fees then the Banks. I was wondering what is the advantage of doing your banking at a bank rather then a credit union? Jourdan, Anchorage, AK

Answer: I’m a fan of federally insured credit unions. Credit unions have their equivalent of FDIC insurance that backstops your deposits. The terms and limitations are the same. And, as you notice, many credit unions offer their customers better interest rates, lower loan rates, and reduced fees compared to many of their banking competitors. But not all.

So, I would do some comparison shopping for the kind of banking you do. I wouldn’t hesitate to do business with a credit union if it offers better terms and service. Indeed, after the way many large banks are treating their customers these days–from hiking fees to closing credit card accounts–more and more people are turning to credit unions, community banks, community development banks and other local institutions. It’s a good move.

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