How would you describe a typical bank branch? There’s a sign out front indicating that it’s a bank. Two glass doors lead into an open lobby. A line of smiling faces is there to greet you. Along the side of the building are three drive thru lanes and an ATM. No surprises.
How would you describe a credit union branch? It would share many of the same characteristics. The two buildings are essentially the same. But when you start searching for what sets the two buildings apart, you may notice subtle differences. Different landscaping, brick versus siding, etc.
Although banks and credit unions serve similar functions, consumers who really search for what is different between the two find factors that influence where they take their business. One of the number one places where the two differ is rates.
According to data reported by the NCUA at the end of September 2016, credit unions outperform banks on CD/share certificates, checking accounts, credit cards, mortgages, and auto loans.
Here is an excerpt from SNL Financial’s report on what they found when comparing rates:
In its June 2014 analysis, SNL Financial found the difference between banks and credit unions was greatest in car loan interest rates. The average 36-month used car loan interest rate offered by credit unions was 2.71 percent compared to 5.26 percent for banks. For new car loans, credit unions offered an average interest rate for 48-months of 2.64 percent compared to 4.78 percent for banks. The average interest rate for credit card loans at credit unions was also lower at 11.55 percent compared to 12.89 percent for banks. For deposits, SNL Financial found credit unions, on average, had higher 5-year CD interest rates at 1.34 percent compared to banks at 1.15 percent.
Even though banks and credit unions may look the same on the outside, there are dramatic differences that affect how much money you pay on your loans, and what type of rate you receive on your deposit accounts.
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