The debate between using a traditional bank or a credit union has been going on for a long time. Which will work better for your business will depend on the size of your business and what financial services you need from your financial institution. Both banks and credit unions are insured, so no matter which one you choose, your money will be protected. They both provide checking and savings accounts, plus lines of credit for personal and business needs. Which you choose depends on which features are more important for you and your business.
Let’s take a look at the major differences between banks and credit unions.
Who do they serve?
The most prominent distinction between banks and credit unions is how they view their patrons.
Banks serve their investors and are for-profit businesses. Their clients are customers and have no say in how the bank operates.
Credit unions are either nonprofit or not-for-profit organizations. They serve their members, who are part owners of the credit union. Members can vote on changes and policies within their credit union.
Because credit unions exist to serve their members, not investors, they almost always have better fees than banks. They often have free checking and savings account options, and typically don’t have minimum balance requirements. Fees for bounced checks tend to be lower, too.
Banks use fees, in part, to pay their investors. They may offer free checking and savings accounts— if you meet their criteria. Otherwise, there will be a monthly fee.
Like with fees, credit unions seek to keep their interest rates agreeable for their members, whether it be for loans, credit, or savings accounts. Because they don’t have investors, the money they make comes back to their members.
Banks almost always have high interest rates on loans and credit and cannot compete with credit unions in this department. Interest rates for standard savings accounts are inferior as well.
Arguably, banks are more convenient than credit unions because they offer more locations and ATMs, and many have locations nationwide. Many banks have more friendly, non-traditional banking hours available as well for added convenience.
Credit unions tend to be small, location-specific organizations, so there may only be a handful of ATMs and branch locations. Some credit unions do provide co-op access to other credit union ATMs for out-of-town usage, however, so you’ll need to factor that into your choice.
Technology is an area in which credit unions suffer. They often trade out mobile and digital banking options in favor of maintaining better fees and interest rates for their members. Services available will vary by credit union, however, with some existing exclusively online.
Because banks are large, for-profit businesses, they often have bigger budgets to create digital banking services. This makes out-of-town, international, and after-hours banking far easier, and makes banks the preferred choice for some businesses.
Customer service is known for being a keystone amongst credit unions— after all, their members are their owners. Credit unions are known for being flexible with their terms for credit (including business credit) and for their loans, which makes them ideally suited for working with small to medium sized businesses. Should you need to take out a loan from a bank, there’s no way they will negotiate the terms of your loan. Forget it.
Due to their size, banks typically offer better/more services in the way of investments, which can make them more appealing to large businesses. Most credit unions do not have the size and budget to offer investment services.
Which is better for event rental companies?
Most small to medium sized businesses— of any type— prefer credit unions over banks because of their lower fees, better interest rates, and flexible terms. Because small businesses may not have a lot of financial wiggle room, these features can make a huge difference in their ability to survive leaner financial times.
When choosing a credit union, make a list of local branches and compare their offerings. Someone there will be glad to meet with you to discuss what you and your business need and if you’d be a good fit together. They may even have suggestions for other credit unions if you’re not a good fit. Don’t be afraid to ask a lot of questions, and make sure you talk with all of the credit unions on your list before making a decision. Choosing a financial institution for your event business is an important decision, so don’t rush it!