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Know the differences between banks and credit unions before moving your money

Credit unions and banks are, of course, two different types of financial institutions but they do offer some similar services such as deposits, checking accounts and loans.

It’s become a common practice for customers to take their money out of one place and move it to another, usually looking for a better deal or better service.

As with any choice you make involving your money, you need to do your homework and study the options of both institutions before you decide where to put your money.

Dollar blocksThe Mississippi Department of Banking and Consumer Finance examines and regulates all state chartered commercial banks and state chartered credit unions, among other institutions.

Commissioner Jerry Wilson advises consumers to shop around carefully before picking a bank or credit union.

“There are many different types of accounts so they should look around and decide which account best fits their budget,” he said.

Most state chartered credit unions in Mississippi are small because they cater to a particular group of people that make up their membership.

The larger credit unions are generally federally chartered and offer services similar to the ones offered by banks.

Here’s a look at some of the similarities and differences between a credit union and a bank:

» Both banks and credit unions take deposits and offer loans. It’s generally accepted that credit unions have lower fees and loan rates than banks and interest rates on savings accounts can be higher.

» Credit unions can also offer incentives such as free accounts and don’t have to rely on fees that banks apply to various services.

» Credit unions are member owned, not-for-profits. The average cost of buying a share is $5 to $10. If you’re a member of a credit union you have an equal voice in its operation, no matter how much is in your accounts. Banks pay shareholder dividends based on the number of shares owned. Credit unions, though exempt from federal tax, can still make money but profits are shared with their members.

» Because credit unions operate as a non profit they do lack some bells and whistles found at commercial banks that have deeper pockets.

A common complaint about credit unions is not having more ATMs for customers’ convenience.

However, some of the larger credit unions are keeping up with technology by offering new services such as check deposits via smartphones.

» According to the National Credit Union Administration’s consumer website mycreditunion.gov, credit union membership is open to everyone. The NCUA regulates federally insured credit unions.

There are four major entry points to join a credit union. One is through your employer and another is through a relative who already belongs to a credit union.

Your membership in a church, school, labor union or other types of organizations may also make you eligible for membership. And just by living, working or going to church in a city or community allows you to join some credit unions.

The rules of joining a credit union don’t seem excessive but some potential customers find the hassle of membership requirements reason enough to keep them doing business with commercial banks.

 

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About Lisa Monti

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