Age 18 is the golden year for most teenagers. It marks the beginning of adulthood and includes all of the decisions that come with it. One of the most important decisions is about money and where to put the money that is earned.
Many young adults follow in their parents’ footsteps and bank at the same place. However, some venture out on their own and bank elsewhere.
Some join credit unions such as Altura Credit Union, SchoolsFirst FCU and California Coast Credit Union while most people trust large banks such as Bank of America, Wells Fargo and Chase.
According to MSN Money, credit unions estimate their total membership to about 90 million customers.
However, in order to understand which company is best to invest money in, the differences between credit unions and banks must be understood. Credit unions are owned by members while banks are held by stockholders. Therefore, the profit made by a credit union is returned to its members while that earned by banks goes to its stockholders through dividends. For that reason, a credit union can pay higher interest on deposits and charge less on loans.
Toward the beginning of adulthood, the primary use of banks and credit unions is purely for checking and saving accounts. With the use of either of these accounts, both credit unions and banks are suitable.
However, as adults grow older, they see the need to purchase large ticket items like cars, apartments or houses. With large purchases such as these, many find they need a loan in order to complete the purchase. Credit unions usually offer a lower interest rate on loans, whereas banks have slightly higher interest rates.
Credit Unions are often non-profit, so they are tax-exempt and often pass along their savings to their customers. Banks are taxed and often have to charge a little more in order to make up the difference.
Credit unions also see their customers differently than banks. Banks see their customers as only customers, a basic number off of which they are trying to make a profit. Credit unions, however, see their customers as partial shareowners and thus treat them as such. Therefore, the fees are usually cheaper because they view the customers’ business more as a partnership rather than as a customer.
Banks,are insured by the FDIC up to $250,000, whereas Credit Unions are insured by the National Credit Union Association for up to $100,000. This poses a problem to members who hold an immense amount of money in accounts with Credit Unions if the economy was ever to fail.
Despite all of these differences, it is customer preference that keeps credit unions and banks flourishing.