Credit Unions vs. Banks

Choose the right institution for each specific need.

It’s good to note that you don’t have to be wholly on the side of banks or credit unions – you can trust in both and accept assistance from each when it’s the right choice in that situation. People are often overly loyal to their banking institution, so they miss out on better opportunities that they may have by shopping around for each financial service they need.

So let’s say you’re a member of a local credit union, so you have a bank account and standard savings account with that institution. However, when you go to buy a home, that credit union may or may not have the best rates on a mortgage. You have to shop around to compare the loans and interest rates that various institutions may offer. This way, you get the best financing at the lowest rate possible.

It’s good to note here that when you shop around for a loan like a mortgage or car loan, you can apply to multiple lenders within a short period of time without negatively impacting your credit score. In some cases with multiple credit applications over a short time – like if you’re shopping for credit cards – each application generates a credit inquiry. Too many of these inquiries within a six month period can reflect negatively on your credit and reduce your credit score.

However, multiple mortgage and auto loan applications with a short span of time are grouped together as one inquiry. This allows you to shop around effectively, so you can compare rates and terms from multiple banks, credit unions and other loan servicers to see who provides the best option for financing.

Keep in mind that there is nothing that prevents you from banking at different places at the same time. So, for instance, if you have a cash-back rewards credit card through a particular bank, they may provide additional incentives for direct depositing the money into a bank account with them. In this case, you may want to open a savings or Money Market Account with that bank, even though your main bank and savings account are with a credit union.

Additionally, when it comes to saving and investment tools like Money Market Accounts (MMAs) and CDs, you always want to go with the financial institution that will provide the highest rate of return or yield on the money you invest. The higher the APY (annual percentage yield) and the faster the rate compounds, the more your money will grow. So an investment that compounds weekly at 2% is the better option for your money over an investment that compounds monthly at the same 2% rate.

By being open to using different financial institution instead of coming down staunchly on the side of credit unions or banks, you improve your ability to manage your money and save effectively. So don’t limit yourself and remember to shop around anytime you need a new financing or investing tool. Just because your bank was the best option in one circumstance, doesn’t mean they’ll always provide the best rates. It’s worth it to shop around.