SMB Tech Advice Information Technology advice for small and medium businesses: from startup to success!

Financial Institutions: Bank vs Credit Union

Not every decision you make about your new business, or existing one for that matter, will be about technology. Every business must have a financial institution to house the capital that will flow in and out of the business. The bank has long been the preferred institution for this role, but that view is changing. In our difficult financial climate today, banks have been at the center of scandals from unchecked risk to refusing to lend after they were capitalized by us, the tax payer. Couple this with the fact that many of these large banks now want to charge all sorts of fees to 'make up for losses' which were recently imposed to lower the cost of doing business with debit cards, and you will see that many people are ready to leave these banks in droves.

So where does one go when they want to leave a bank? Credit Unions have been around for over 150 years and make a clear distinction from banks in that they are not-for-profit cooperative financial institutions which are owned by their members. In this way, they are not beholden to the constant greed typical of shareholders of publicly traded companies. The credit union exists to provide an alternative financial institution that is frugal, not overly risky with depositor money and offers excellent interest rates on a full range of products and services.

Most credit unions offer the same services that traditional banks do such as savings accounts, checking accounts, credit cards, loans and investment services. Because they are member owned, they often have much higher levels of service for their member customers. In addition, credit unions will generally offer most of these services at no fee. In essence, you get most, if not all, of the services that a bank offers, at lower interest rates with no fees.

My first financial institution experience was with a credit union, and after many years with both a credit union and a big bank account, I knew that a credit union was the place to open my business account. I have kept the big bank account only out of convenience due to the many ATMs available across the country, but I find that I rarely ever use an ATM at all. With the recent push by these big banks to laden down their customer with ridiculous fees, such as a $5 monthly fee to use a debit card, I may just close that account very soon.

As a mater of fact, Guy Fawkes Day (the 5th of November for those not privy to English historical events) is often used as a symbolic day of uprising or anti-institutionalism. This November 5th has been deemed bank transfer day here in the US, and I am feeling the urge to close that account. I may just make it happen.