Community Banks and Credit Unions vs Mega Banks

Author:     Wednesday, September 10, 2014 12:00 AM

When it comes to banking, selecting the most appropriate place to develop your savings plan, obtain loans and reach for your financial goals is important. Even though a large bank may seem like a good choice, there are disadvantages of working with mega banks. In many cases, a credit union or a small community bank is a better choice to help you reach your financial goals.

Low-Cost Loans

A key factor that sets credit unions apart from large banks is the cost of taking out a loan. In a credit union, or even a small community bank, the average interest rate is usually much lower when compared to a large bank.

Along with mortgages, personal loans and car loans, a credit union can also offer low-interest credit cards and better terms and conditions for your loans. In a credit union, the rules are not set by shareholders or large corporate policies; instead, the members set the rules and guidelines. As a result, the loans and credit cards are more competitive.

Better Interest on Savings

In a large mega bank, the average savings account will not even provide one percent in interest. Credit unions often offer a higher rate for savings accounts and you can usually find better options when you are trying to reach a particular savings goal.

Fees and Charges

Although you can expect certain fees and charges at a credit union, the number of added expenses are limited. For example, you may have overdraft fees if you accidentally withdraw too much money from your account, but you might not have ATM fees.

Many large banks will charge added fees for a variety of situations, including the maintenance of your account. For example, you may have annual fees for a checking account or even just maintaining a credit card. Credit unions often provide free ATM services and may have fewer additional fees.

Trust Level

The benefits of working with a credit union or a small community bank are not limited to just the financial aspects of banking. Many large banks have been involved in large scandals and you may not always feel that the bank is trustworthy.

Credit unions and community banks do not follow the same rules and guidelines because of the community elements. As a result, it is easier to trust the bank with your money and your financial goals. You will not need to worry about scandals, hidden costs or additional fees that you did not expect.

Selecting a financial institution for your money requires the right balance between banking convenience and trust. If you cannot trust your bank, then it may be time to make a change to something smaller or more local. It is also important to consider your financial goals because some banks may not offer the best rates for your mortgage or credit card.