BANKING

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Chase Bank serves 82 million customers. It is the largest bank in the US. However, more and more people are switching their banks for credit unions. Nevertheless majority of the people uses the 4 big bank (Citigroup, Wells Fargo, Chase Bank, and Bank of America) or other banks today.

Nationwide, only seven percent of U.S. citizens do not own a bank account, according to FDIC. However, more and more Americans who are unbanked and underbanked are utilizing payday loans and other lending services that procure exorbitant interest rates, which is probably the worst thing anyone could do to catapult themselves into debt. The majority of people who do not have a bank account believe that they do not have enough money to hold an account. Most bank accounts today are free. The same service payday loans offered at preposterous rates are offered by banks without the atrocious interest rate. It is free to customers, and banks’ amenities include depositing, withdrawing, earning interest, check-writing, purchasing with a debit card, and lending at reasonable rates (varying on the individual’s credit). A bank is a good place to start building your wealth; it can even help financial security and stability. It is also convenient for safekeeping, it is easy to track, budget, and most importantly bank accounts help everyone save money. 

Nevertheless, a large percentage of Americans struggle to save any money even with a bank account because they are mismanaging their bank accounts and always spending—living paycheck to paycheck. Most people do not know where their money is going. Not knowing how they are spending and what they are spending is a bigger problem than most people realize. The absence of budgeting is evident when many people are left with an empty account. The problem isn’t solely managing, though. It is more than just that. It is also surrendering countless dollars to fees, and the bank account itself that may be costing a fortune. People are shoveling money out of their pockets on ATM fees, overdraft fees, wire transfer fees, monthly fees, and the list goes on. These fees can pile up, and bank accounts may do some people a disservice, probably worse than for those people who do not own a bank account. However, there are ways to keep it fee-free and utilize banks for prosperity.

Many people today are struggling with their personal finance, balancing between their checking accounts and savings account. Ultimately having the objective of saving as much as they possibly can into their savings accounts and spending the least amount they can. Consumers are questioning themselves every day what to do with their money.  If they want to transfer their funds to save interest in their savings account or to keep it in their checking account to spend or be debited from auto-payments. Consumers are being charged NSF (Non-Sufficient Fund) fee and or overdraft fee. They are forgetting their credit card payment was due, so they are forced to surrender countless of fees. Most people concedes to just leave all their funds in their checking account to avoid those pesky fees, but this is a problem for anyone who wants to save money because most checking accounts don't offer interest rate (some do, but they are at a measly national average of 0.07%). This is a true dilemma for millions of people today. Is there a solution? Sure, you can remind yourself to leave enough funds for each auto-payment transaction, but what if I were to tell you that there is an account out there that pays you high dividends and has all the capabilities of a checking account? Is there such thing? Yes, it's called the Rewards Checking Account. A reward checking account is a checking account that offers many more incentives and perks than an ordinary checking account. It typically earns at a high interest rate. Some banks offer reward checking accounts (they may have different names), but they offer at a certain price, meaning monthly fees. And let's be real here, those monthly fees can eat up your interest earnings every month! If you want to avoid those monthly fee reward checking account, I go with Online banking or Credit Union because they are FREE! But not only are they monthly-fee free, they have a much superior interest rate than your brick and mortar banks!

You may have heard of a Credit Union. But what is it? Credit Union is a financial institution (like banks), but is member owned and is not-for-profit unlike banks, which are for-profit organization. How do you become a member of a credit union? It's not that exclusive as you might think. You do not need to be a member of anything to open a credit union membership (unless you're trying to open up a Navy Federal Credit Union account. Either you served or currently serving in the US armed forces or have a family member ties in the armed forces, Department of Defense, or National Guard).  All you really need is a $5 bill to become a member of a credit union and to me, it's best $5 you will ever spend! The $5 deposit into a share account or membership share savings account will establish your membership. But what's the difference between banks and credit unions and which one is better? If you want the short answer (read below for the long answer), it's credit union, but it's certainly not for everyone as some people looks for other things besides profits and incentives. Nonetheless the great majority has no idea about the credit union's benefit, neither do they know what a credit union exist for nor do they know anything about it.

Banks or Credit unions?

Both financial institutions offer similar services. However, credit unions are different than Banks. Credit unions are local and focused on serving the community. They are not-for-profit financial cooperatives, while banks are for-profit corporations. Credit unions are also backed full faith up to the standard $250,000 from NCUA (National Credit Union Administration), practically like the FDIC (Federal Deposit Insurance Corporation), which also insures up to $250,000 per depositor for bank account holders. Which is better, credit union or banks? If you like the short answer, it is credit union and below is the long answer.

Why Credit Unions Is Better

While banks are mainstream, credit unions are not, but that doesn’t necessarily mean that banks are better. Credit unions are better for consumers because of their competitive rates, both loans rates and interest rates to checking accounts, which some brick-and-mortar banks don’t even offer interest rates on their checking accounts, but even if banks do, credit unions are so much superior to their interest rates. Credit unions may charge an upfront one-time membership fee (typically $5), but it’s worth the cost that the credit union saves you plethora of money from charging ATM fees and saving you money from earning competitive interest rates from their rewarding checking accounts. Credit unions also take the cake for accessibility. Although brick and mortar banks have more branch locations and ATM machines, credit unions are co-op (shared branch), which means that you can access your funds at other credit unions branch locations. You can access your funds from these shared branch credit unions even if you’re thousands of miles away from your actual credit union. Credit unions also give you the perk of reimbursing your ATM fees from other banks or other ATMs, as long as you meet their minimum checking account requirements. Let’s look at a side-by-side comparison of Banks, Credit Unions and Online Banking.

Financial Institutions Comparison

Bottom Line

When it comes to interest rates for loans and checking accounts, credit unions is far superior than banks. But when it comes to technology and utilizing smartphone apps and websites, it's banks. Banks are very user friendly and more interactive on smartphone apps and websites. Nevertheless, credit unions offer much more to their consumers and even incentivize more through their reward checking account such as high interest rate (which most brick mortar bank checking accounts doesn't even offer), and ATM reimbursement fees. As you can see above on the financial institution comparison, credit unions benefits more to consumers. I prefer credit unions over banks any day of the week. But what about you? Which account is best for you? It depends. It depends on what you are looking for out of the account. Most people value lower fees, reduced rates, higher dividends, nationwide bank coverage and accessibility, but not everyone values the same attributes as others, not everyone value those benefits and features of credit union, some people value the mainstream and the other features of banks. 

Use It To Your Advantage

Whichever you decide is best for you, use it to your advantage. Although credit unions is more rewarding and has more incentive, banks are still a great place to secure your asset and keep track of your money. When you need to withdraw cash, find their ATMs or partnered ATMs. Most banks are partner up with other banks or stores. Check their website  (or App) and look into their ATM details if they offer free withdrawals with participating store or with another bank. According CNN, JPMorgan Chase, Bank Of America, and Wells Fargo made over $6.4 billion in 2016! They made a killing off their consumers (perhaps you are part of this statistics) from ATM fees, NSF fee (Non-sufficent Fund), wire-transfer fee. However, fees are not inevitable. It is possible to avoid some fees that banks charge. Sometimes they can even be refunded or reversed! How you can avoid these fees is simply by reading the bank’s fee schedule. It is simple as that! By reviewing the fee schedule, you’ll know all requirements and how to avoid all those pesky fees. Reviewing the fee schedule can help you be more decisive if you still want to bank with your current bank or take your business elsewhere. You can pick up a copy at the branch or review it on their website. Every bank’s fee schedule is different. Reading the fee schedule is the best way to avoid fees, but there are other ways to avoid fees and pay less fines by getting overdraft protection, asking for a courtesy.

You can also transfer funds for free as well! Instead of using wire-transfer and be charge $25+ for every transfer, you can use ACH (Automated Clearing House) transfer. ACH is a electronic money transfer. Usually this feature is free to their consumers, but the only drawback is that it takes up to 1-3 days to complete the transfer. As for wire-transfer it can be completed within a day. So if it's not urgent for you to transfer fund, use ACH on your next funds transfer. Additionally, you can use third-party App services like Zelle, Cash App, PayPal, Venmo or other P2P payment app for free.