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Credit unions are not banks and they have a different set of rules. Banks, on the other hand, have strict regulations that may put your business at risk if you don’t follow them. Let’s compare to find out which is best for your business.
The “credit union vs bank for small business” is a question that has been asked many times. The answer is not as easy to find as one might think. There are pros and cons to both credit unions and banks.
Financial organizations such as banks and credit unions provide a wide range of business banking products and services. The primary distinction between a bank and a credit union is that a bank is a for-profit financial organization that is open to anybody, while a credit union is a nonprofit financial institution that is only open to qualified members.
At a Glance: Credit Unions vs. Banks
Products that are available
Banks and credit unions both provide business savings and checking accounts, business loans, commercial real estate finance, business credit cards, investment services, and business insurance, among other financial goods and services. Smaller credit unions for business, on the other hand, may simply provide basic business banking products like business savings and checking accounts, and may not offer additional services that major banks do.
Monthly Charges
Because banks are designed to make money, they often charge more and higher fees than credit unions. Some banks, particularly those that operate entirely online, do, however, provide free business checking accounts. While many credit unions provide free checking accounts with no minimum balance restrictions, others impose fees for particular business checking accounts.
FDIC vs. NCUA Deposit Insurance
Both banks and credit unions provide a secure environment for your company cash to be deposited. The Federal Deposit Insurance Corporation (FDIC) insures banks, whereas the National Credit Union Administration (NCUA) insures credit unions. If a federally insured bank collapses, the FDIC will protect your entire deposits up to $250,000. Similarly, the NCUA insures the total deposits of credit union members up to $250,000.
Availability of the Network
Most major conventional banks have a significant network of physical branches and ATMs around the country, however other smaller banks just have a few branches and ATMs. Because they exclusively function online, internet banks do not have physical branches. While credit unions normally have a small number of locations, the majority of them are part of a network that provides access to shared branches and ATMs around the country.
Rates of Interest
Credit unions typically offer lower Rates of Interest on loans and higher annual percentage yields (APYs) on deposits; this is because credit unions are organized as nonprofits. Online-only banks may offer lower loan rates and higher deposit rates compared to their brick-and-mortar counterparts because they don’t have the same operational expenses as traditional banks.
Technology & Online Banking Experience
Because major banks have more technological expenditures, their web and mobile platforms are usually more sophisticated than credit unions’. With their online banking services, banks prefer to make more technological changes and provide more capabilities and features. Credit unions that provide seamless digital and mobile banking choices are uncommon, but they do exist. Before you create a business account, be sure the bank’s or credit union’s web-based and mobile banking platforms have all of the features and functionalities you need.
When Should You Use a Credit Union?
A credit union is best for business owners who need basic business banking products and services and who are eligible for membership, such as live or work in a certain area, part of an eligible organization. It’s best to choose a credit union if you are looking for business bank accounts that have fewer fees and offer higher Rates of Interest. A credit union is also a great option for businesses that don’t need a wide variety of banking services and won’t need to access physical branches nationwide.
When Should You Choose a Bank?
A full-service bank is a good option for company owners that want a diverse range of business banking products and services. Consider establishing an account with a conventional bank if you need access to a physical location. Otherwise, a totally digital bank may be a preferable choice if your company does not often perform cash transactions and will not need to use an in-person location.
Pros & Cons of Credit Unions
Pros & Cons of Banks
Conclusion
It’s crucial to assess your company’ banking requirements and objectives when selecting whether a bank or a credit union is best for you. If you are eligible for membership and want superior customer service and a more personal banking environment, you may want to consider a credit union. Working with a bank may be a better alternative if you want more modern technology and a wider range of banking goods and services.
The “best credit union for business account” is a question that comes up often. There are many factors to consider when deciding which is best for your business.
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