If you are looking for a new bank to open financial accounts as an immigrant in the United States (U.S.), you may want to consider credit unions as one of your options.
Credit Unions are similar to banks, offering financial services including loans, checking accounts, and savings accounts that are available at a traditional bank and are equally safe. They tend to be smaller than banks, have fewer branches, and may lack technology like mobile banking, but they offer more personalized service at their branches.
Credit Unions are not-for-profit financial institutions and are focused on serving communities and the immigrant population in the U.S.
As we will see, there are some major differences between the two types of financial institutions.
So, what exactly is a credit union and how are they different from a bank? Knowing the differences will be handy in making the best decisions for your finances.
A credit union is a not-for-profit organization governed by its own members. According to the Credit Union National Association, more than 118 million Americans belong to one as of a 2019 report.
Typically, credit union membership is open to individuals who work in the same industry, live in the same community, share faith, or are members of another organization. However, most people are eligible to join one.
The main difference is that a bank is a for-profit financial institution while a credit union is a not-for-profit institution.
Banks need to make a profit for the investors whereas credit unions aim to serve their community and provide financial products with the best terms they can afford to their members. Credit unions don't need to make profits for their members.
Credit unions as a nonprofit usually don't have to pay federal taxes and even receive subsidies from the organizations that they are associated with.
Banks have added convenience and easy accessibility because there are more branches and ATMs nationwide than credit unions.
Credit unions are smaller and limited to towns and cities, with fewer branches. To overcome this disadvantage, credit unions often form a CO-OP Shared Branch network to give access to more branches (above 5,600 shared branches) and fee-free ATMs nationwide.
For example, you can search for branches online with Connexus which offers more than 54,000 surcharge-free ATMs through the CO-OP or MoneyPass.
Large banks have money to invest in technology such as mobile banking apps, unlike small credit unions. This adds flexibility and convenience to the services offered by banks.
You may find credit unions with online banking services but it can be hard to keep up with banks that mostly operate with the latest financial technologies. For instance, banks can be faster than resolving problems such as fraud cases thanks to their advanced tools and support.
Banks are in the business for making a profit because they are either owned privately or publicly traded. This is partly why banks have more fees than credit unions, the interest rates on loans are higher and savings rates are lower than credit unions.
Online banks and credit unions offer higher savings rates as compared to brick and mortar banks.
Banks offer a wider range of financial products and services, both for personal and commercial banking. It offers loans for business, credit cards, various investment and saving options such as IRAs (Individual Retirement Accounts), Certificates of deposits, etc.
While credit unions are a great option for basic banking services, banks have better offers for other financial services. For instance, credit cards offered by banks are more likely to have better rewards and perks when compared to credit unions. And banks have a wider network to facilitate international money transfers.
Accounts in banks are insured by the Federal Deposit Insurance Corp (FDIC) while credit unions are insured by National Credit Union Administration (NCUA), for deposits up to $250,000 for both.
If you have more than $250,000 either at a bank or credit union, you should talk to customer service.
Also, NCUA recommends that you check if the credit union has the NCUA-insured sign on the NCUA's website.
With large banks, customers don't have a say in how a bank should be run. At a large bank, you are a customer and since the rules are not set at the local level, it is less flexible.
But with a credit union, members can take part in decision-making and have the ability to vote on the financial institution's policies. Since credit unions are smaller, there is a personal touch and members have a better customer service experience. In fact, obtaining a loan from a credit union can be easier than from a bank.
Banks or credit unions, to make the right choice for your money, you will need to consider what is the best for your requirements. Banks may be the better choice if you need the nationwide presence of bank branches and ATMs, easy access to mobile banking, and more financial products. But for people who are attracted by lower interest rates and fees, higher savings rates, free financial education, and personalized customer service, credit unions will serve better.
If you are new to the U.S., you may want to explore local credit unions in your area that may be offering specialized credit building products for new immigrants. It can be daunting to get a credit card or avail of a loan for a car for someone with no credit history in the US. Tech CU is one of the largest credit unions in Silicon Valley that offers services especially focused on high-skilled new immigrants or green card holders.