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Bank or Credit Union? You pick

You probably have some of your money in either a bank or a credit union, but banks and credit unions offer different benefits, depending on what you're looking for.

Bank basics

Modern banks can trace their history back to 14th century Italy. Banks are owned and run by investors and shareholders who make money based on their investment. Banks are for-profit entities, which means they are supposed to make money for their investors. Bank accounts up to $250,000 are insured by the FDIC.

Credit union competitors

Modern credit unions trace their roots back to the middle of the 19th century. People who use a credit union are considered "members" as opposed to customers, and members have a voice in how the organization is run. Members elect a board of directors to represent the members in making decisions and upholding policies.

Credit unions are typically designed to serve a particular group; most of the members tend to work for or belong to a particular organization. There are, however, some credit unions that serve a very large number of different membership groups - and these large credit unions offer all the same services as very large banks. Unlike banks, credit unions are not-for-profit organizations. They have to earn a small profit (a "surplus"). Any additional profits are used to benefit the members. These benefits usually include higher interest rates for savings, lower fees for various services and, frequently, free checking and bill payment services.

Accounts at credit unions are insured through the National Credit Union Share Insurance Fund up to $250,000.

Understanding products and fees

Both types of institutions will provide checking accounts (checks are called share drafts at a credit union). Both provide savings accounts, different types of loans, credit cards and certificates of deposit (CDs).

However, large banks may provide a wider range of investment products and services, have a more sophisticated online system and offer a larger network of ATMs and locations.

Some large credit unions provide equally sophisticated services, but there are fewer large credit unions, and people need to meet membership criteria to join them. Recently, some banks caused a stir among their customers for assessing a monthly fee on ATM cards, regardless of whether or not the cards were used. Credit unions have tried to differentiate themselves from the for-profit banks by offering lower fees and better interest rates. Fees may be one area where credit unions can offer you a better deal.