Bank Your $$ As A Customer Or A Member?


For most of us, possessing a bank account is essential to managing our personal finances.  Bank accounts enable a person to earn interest in a savings or money market account.  Also, checking accounts are commonly used to pay bills.  Yet, with various financial institutions to choose from, many people may not know the differences of one to the other.  Nonetheless, one of the most basic decisions a person will want to consider is whether to choose a bank or a credit union.

A bank is a for-profit organization, which has investors who fund it’s capital.  Investors and stockholders of a bank are primarily interested in making money.  Therefore, at a bank a person is considered a customer who uses its service and in return pays for those privileges.  Services are paid for in the form of interest and fees.  Although, some small banks are local, many others are nationally known.  The larger banks are able to offer more services and are found in most cities.  Also, for those who use ATMs, larger banks are more convenient.  Banks have Board of Directors whose responsibility is to make decisions that will maximize profit for its investors and stockholders.

A credit union, on the other hand, is a not-for-profit organization.  Rather than investors, credit unions rely on the people who use its services–its members–to operate.  Credit unions have membership requirements, which is normally determined by who it serves.  Credit unions may serve a specific community, group, group of employees, or members in an organization.  Since credit unions are not focused on making profit, members often benefit through lower fees and interest rates.

For computer-savvy people, financial institutions offer internet banking, which provide services to those who do not regularly bank at branch locations.  In addition, internet banks that do not have the traditional brick-and-mortar building for services are able to offer lower fees and higher interest rates since its overhead is lower than traditional financial institutions.  One of the primary drawback is that an internet account does not allow a person to spend from that account.  Rather, the funds would need to be transferred into a regular checking account first before spending. 

Each individual has varying financial needs, thus choosing a particular institution should be based on those specific needs.  By taking the time to familiarize yourself with services and options available, you can be assured the financial institution you ultimately choose will work best for your specific needs.   

Do you have a bank account and is it with a bank, credit union or internet bank?  Would you consider a different financial institution given the options or unmet financial needs you may have?

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