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Many small business owners use traditional banks, however credit unions are also a great option for business needs. Read on to learn the difference between the two and which one is best for small businesses.
Credit Unions
One of the benefits about credit unions is their low to non-existent fees and the ease of opening an account. Opening a checking account with a credit union can be done with as little as five dollars. Same with a savings account, they have a minimum deposit that is very low. It varies from credit union to credit union, but the amounts are generally low.
Opening a checking and savings account at a traditional bank requires more in a deposit such as from $50 to $200. They also have lots of fees associated with them. Depending on the type of account you are trying to open at a traditional bank, you might be required to:
- Pay a fee for every transaction
- Pay a monthly maintenance fee to keep the account open
- Maintain a minimum balance to keep the account open
The great thing about opening a business checking or savings account at a credit union is the low fees. Depending on the credit union, you are not charged a fee per transaction or a monthly account maintenance fee. You are also not required to have a minimum balance in the account. Traditional banks are required to meet shareholder expectations which is why they have so many fees. They are designed to make money, so they have high fees and interest. Credit unions do not have shareholders, so this is why their fees are much lower than banks.
Credit unions are also great for financial education. Most offer seminars to learn about retirement savings, life insurance, investing and more. These topics are all important for business owners who want to learn how to earn income from their business the right way.
Traditional Banks
Traditional banks are good to obtain the funds to finance your business. You do not need to have an account at a traditional bank to apply for unsecured business credit or a small business loan. If you have a good relationship with the bank and a significant portion of your company revenue is being deposited into an account at the bank, they are more willing to approve your financing request. Traditional banks have more branches in the region or across the country and are quicker to roll out new apps.
The Bottom Line
Although most people go to traditional banks to get funding, credit unions are a great option to consider. Their low fees and interest are appealing compared to traditional banks and their high rates. The main difference between these two types of institutions is that banks are for profit and credit unions are nonprofit. Consider researching your options before you apply so you pick the best option for you and your business. Research with national, local, or online banks and credit unions offer the best feature for your needs.
