What is a Credit Union?

A credit union is a non-profit bank that typically operates at a smaller scale than the more household banking name like JPM Chase, Bank of America, Citibank, Wells Fargo, TD Bank, etc. These credit unions typically offer consumers better saving APYs since they are non-profit institutions (although this isn’t always guaranteed to be the case) but there are also some drawbacks associated with banking solely at a credit union. For the most part, they offer consumers a small and pap experience that might not always be available at other banks.

Credit Unions might not always have the most robust offerings in terms of banking convenience and can leave a lot to be desired compared to bigger banks. However, credit unions do a fantastic job of offering clients a more personable experience and they really excel and giving consumers that one-to-one relationship that many seek.

Zelle and Payment Transfer Options

Smaller credit unions might not have all the fantastic modern-day innovations that some big banks are known for like Zelle and other easy to use payment methods. They might also be lacking in some other features like a good UX/UI on their mobile app. It’s possible they are lacking in other payment integrations from commonly used shadow banking companies, however this downside can often be overlooked by using your debit card if no convenient payment integration is available.

Opt for a Savings Account at a Credit Union

In some scenarios it might make sense to have a saving account at a credit union and still hold onto your big banking checking account so that you can still have access to modern day tools without losing some functionality you might genuinely enjoy from big banks. Who’s to say that you can bank at multiple institutions and have a hybrid type of setup?

Stress Tests and Safeguards on Your Money

FDIC insurance still applies to Bank deposits regardless of bank size in the United States. However, there are different levels of compliance and risk exposure that are performed by different banks and different types of stress testing that they need to undergo. Stress tests are actually easier for larger banks to pass since they undergo different type of tests. As opposed to smaller banks where the standards are harder to meet because they have less assets under management and are more susceptible to regional risk, etc.

Big Banks

Everyone has their preferences. If you want to optimize your interest rates and do banking at a smaller bank that also happens to be a non-profit organization you might want to consider a credit union. However, they can often be limited in their tech stack and have limiting options otherwise. Considering this, it makes sense to actually stick with a big bank in the long term as they tend to have to more longevity. Big banks also actually tend to carry less risk than other consumers since they are considered “Too Big to Fail”. Big banks have also been consolidating much more and smaller banks are getting bought and merging with large banks. This can actually be a bad thing if it reaches too much of an extreme because it can limit consumers options and cause them lose out on innovation that tends to come about with more competition.