What kind of checking account is best for me: banks vs credit unions?

When it comes to choosing a checking account, it can be rather confusing. For example, different types of banks, offering different deals, with different fees all while requiring you to know what they’re talking about. To make things easier, let’s start with the basics: the differences between a credit union and a bank. Both of these financial institutions offer a variety of services, including a checking account, which essentially works the same way; the institution stores your money and you are able to withdraw it anytime you need. However, credit unions tend to be smaller, local and more focused on customer service while larger retail banks may be easier to become a member as well as have a wider variety of customer resources.

Let’s start by looking at credit unions, shall we? A credit union is unique in that the customers are the owners; anyone who chooses to utilize a credit union’s services can provide input into the union’s management and investment plan. These businesses are non-for-profit organizations and therefore do not work to provide an end of the year profit. However, credit unions are very selective on who may join. Often times a credit union is created to service members of a local community or business. Some, but not all, credit unions are part of the shared branching network, which means that you’re able to withdraw money from any credit union that is a member across the country! Credit unions typically have low maintenance fees for using their services, such as online banking, which is great if you’re still looking into starting that checking account! Overall, a credit union is a great option, but you may have trouble finding a credit union willing to let you bank with them. Search your local community to see if there are any in which you could join.

Next we will look into retail banks. Now there are several different types of banks, however as a college student you’re probably just focused on a personal checking account therefore you need to find a retail bank! Joining a bank is relatively simple; they have fewer limitations than credit unions and are often eager to help students. Large retail banks often have an extremely wide variety of banking options to better suit individual needs; this could include automated spending tracking or monthly rewards for spending money on certain items. However, retail banks may charge relatively high maintenance fees on your checking account for online banking or maintain a minimum account balance, which for many college students can cause a considerable dent in their monthly income. Luckily, banking with a national financial institution allows greater accessibility to your money while traveling.

Now that you know the difference between credit unions and banks, check out our Choosing a Checking Account comparison chart. Regardless of what sort of financial institution you decide to open a checking account with, be sure to check if they have a daily or monthly spending limit and think about what sort of services fit your needs the best.

 

Written by: Rachel Richardson, Financial Wellness Peer Educator.

Reviewed by: Kathy Sweedler, University of Illinois Extension-Consumer Economics Educator.

Where is the best place to bank on campus?

We can’t tell you where to bank, but we can help you narrow down your options by knowing what to look for in a financial institution (bank or credit union).

When choosing a financial institution, you’ll want to think about the following things:

  • Convenience
  • Services
  • Security
  • Costs

Shop Around: For a list of questions to ask when shopping for a new financial institution, check out University of Illinois Extension Financial Wellness for College Students’ website.

You can check out the map below for brick & mortar locations of different financial institutions near the three main University of Illinois campuses, and you can watch our recorded webinar, Establishing Your Roots: Getting Started with Financial Services, if you’d like to learn more about choosing the right financial products and services for your needs.

To learn even more about how to manage your finances while in college, including what to look for in a financial institution, you can watch another recorded webinar, Cash at College: Spending, Saving & Student Loans.