Banks, building societies and credit unions (2024)

FAQs

Banks, building societies and credit unions? ›

These institutions are just like credit unions and cooperatives rather than banks. Banks are generally listed on stock exchanges and accountable to stockholders. Building societies, on the other hand, are completely owned by their members, each of whom has a vote.

Unlike banks, credit unions do not have shareholders to be concerned about, which means they can offer lower interest rates on loans and higher interest rates on savings. Credit unions have a reputation for being more personable than other banks.

They are similar to credit unions, but rather than promoting thrift and offering unsecured and business loans, the purpose of a building society is to provide home mortgages to members. Borrowers and depositors are society members, setting policy and appointing directors on a one-member, one-vote basis.

For decades, bankers have objected to the tax breaks and sponsor subsidies enjoyed by credit unions and not available to banks. Because such challenges haven't slowed down the growth of credit unions, banks continue to look for other reasons to allege unfair competition.

Building society versus a bank

Typically building societies offer higher interest rates when compared to a bank, but banks do offer a broader range of products. “Best buy” tables available online, or in the financial pages of newspapers and magazines can be a guide but tend to focus on the benefits of being in credit.

One question that often arises is, "Are Credit Unions Safer than Banks?" If you're looking for a short answer, you'll be happy to know that we're not making you read the whole post: Credit Unions and banks are roughly identical in safety because deposits at both are insured by the Federal government to $250,000.

Your money is just as safe in a building society. The Financial Services Compensation Scheme (FSCS) protects money in banks and building societies.

' According to the Building Societies Association's lending and savings figures from September 2023, building societies have nearly 26 million customers across the UK and have helped 3.5 million people get onto the property ladder.

Building societies provide banking and other financial services to their members. They are similar to credit unions but their members are typically those in construction trades, real estate, or co-op housing.

Should you keep all your money in one bank? ›

If you have more than $250,000 in your bank accounts, any money over that amount could be at risk if your bank fails. However, splitting your balance between savings accounts at different banks ensures that excess deposits are kept safe, since each bank has its own insurance limit.

Spreading your money out across different savings accounts from various banks could help you take advantage of higher interest rates. For example, your brick-and-mortar bank may pay a lower APY for a regular savings account versus a high-yield savings account at an online bank.

Through “right of offset,” the government allows banks and credit unions to access the savings of their account holders under certain circ*mstances. This is allowed when the consumer misses a debt payment owed to that same financial institution.

Limited accessibility. Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network such as Allpoint or MoneyPass.

Credit unions and banks are both insured, with most banks being insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per customer. Most credit unions are similarly insured by the National Credit Union Administration (NCUA) for up to $250,000.

Credit unions tend to provide members with more specialized benefits versus banks. They often offer financial education workshops, loan programs designed for specific needs (like first-time homebuyers), and actively support local community initiatives.

Limited accessibility. Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network such as Allpoint or MoneyPass.

But compared to banks, credit unions tend to be smaller, operate regionally and are not-for-profit. In many instances, they offer lower rates on loans, charge fewer fees and offer better interest rates for deposit accounts than traditional banks.

In addition, credit unions tend to take lower risks compared to banks. They maintain conservative lending practices and focus on member services rather than profit. Because they are not driven by the same profit motives, they may be less exposed to risky financial behaviors that can lead to instability.