If you’re comparing a credit union vs. bank, you’re not alone. While both offer savings accounts, checking accounts and loan options, they operate under different business models. Banks are for-profit, while credit unions are not-for-profit institutions that return profits to members. This distinction can impact everything from your interest rates to the service you receive.
This guide breaks down the major differences so you can decide which is the better fit for your financial needs.
Credit Union vs. Banks: A Quick Comparison
On the surface, the differences between credit unions vs. banks might be difficult to spot.
Here’s a side-by-side look at how they compare:
| Feature | Credit Unions | Banks |
|---|---|---|
| Business Model | Not-for-profit | For-profit |
| Membership | Must meet eligibility requirements | Open to all |
| Deposit Rates | Generally higher | Generally lower |
| Loan Rates | Typically lower | Typically higher |
| Fees | Usually lower | Often higher |
| Branch Network | More limited, but shared branching available | Wide branch and ATM access |
| Technology | May lag behind | Often more advanced |
| Customer Focus | Member-owned, personalized service | Customer-based, more standardized service |
| Insurance | NCUA insured | FDIC insured |
Credit Union Pros and Cons
When trying to decide if a credit union might be right for you, it can help to weigh the advantages and disadvantages.
Pros
- Member-focused, not-for-profit model
- Lower fees and better interest rates
- Strong local and community involvement
- Personalized customer service
Cons
- Must meet membership eligibility requirements
- Fewer branches and service options
- Technology may not be as advanced
Bank Pros and Cons
Here’s what to know if you’re leaning toward a traditional bank:
Pros
- More locations and ATMs nationwide
- Typically faster to adopt new technology
- More financial products and services
- No membership requirements
Cons
- Higher fees and loan interest rates
- Lower returns on savings
- Less personalized customer service
How Membership and Access Works
While banks are open to anyone who can meet basic requirements — like providing a valid ID and an initial deposit — credit unions have specific membership criteria. Here’s how access typically works:
Credit Unions
- Eligibility may be based on where you live, work, or your family or employer affiliation.
- A small deposit is often required to open a new account.
- Some require you to purchase a small share to become a member and part-owner.
Banks
- Generally available to all consumers.
- Easy account setup with ID and initial deposit.
- No eligibility restrictions or membership fees.
Interest Rates and Fees
Banks make money by charging interest on loans and offering lower returns on deposits. Credit unions reinvest profits in their members, which can result in:
- Lower loan rates
- Higher interest on savings and CDs
- Fewer fees — or easier ways to waive them
Still, online banks are worth comparing, as they often offer high-yield savings accounts that may outperform even credit unions.
Product and Service Offerings
Banks and credit unions offer slightly different products and services. Here’s a closer look:
Credit Unions
- Basic banking services like savings, checking, auto loans and sometimes mortgages.
- Limited variety of credit cards and investment products.
Banks
- Wide range of financial products including credit cards, home loans, investments and wealth management.
- More likely to offer everything in one place.
Technology and Accessibility
Technology can vary significantly when comparing a credit union vs. banks.
- Credit unions tend to have smaller branches and ATM networks.
- Many participate in shared branching networks, which allow members to access their accounts at other participating credit unions.
- Although credit union technology has a lot of catching up to do, many credit unions are now offering improved digital banking platforms and features to meet customer demands.
- Banks generally have a larger physical presence with widespread branches and extensive ATM networks.
- Banks provide more advanced mobile apps and cutting-edge digital tools, offering features like real-time alerts and integrated budgeting options.
Customer Service and Community Impact
Credit unions are known for their personalized customer service, often building close relationships with their members and providing tailored financial products and services. They also focus on giving back to their local communities through charitable initiatives and member-focused programs.
Banks, on the other hand, offer standardized services to serve their larger and more diverse customer bases efficiently. Their size allows them to provide extensive resources but can result in less personalized interactions compared to credit unions.
Safety and Insurance
Whether you decide to work with a multinational banking institution or a small local credit union, your money is equally safe.
The federal government insures them both through different organizations.
- The FDIC insures bank accounts.
- The NCUA insures credit union accounts.
How To Choose: Bank vs. Credit Union
When deciding between a credit union vs. bank, consider the following:
- Service availability: Do they offer the features you need now and in the future?
- Branch and ATM access: Are branch and ATM locations convenient for you?
- Technology: Do you prefer a robust mobile app or digital tools?
- Fees and interest: Would you benefit more from lower fees or better deposit rates?
Final Take
Banks and credit unions both have their place in today’s financial ecosystem. Banks often offer services credit unions don’t, while credit unions keep costs low. Consider the pros and cons of each when trying to determine which is best for your financial situation.
FAQ
Here are the answers to commonly asked questions about how credit unions and banks compare.- Are credit unions better safer than banks?
- Both credit unions and banks are insured. Credit unions are insured by the NCUA, while banks are insured by the FDIC. Both provide similar protections for your deposits.
- Do credit unions have better interest rates than banks?
- Credit unions usually offer lower loan rates and higher savings rates than banks because they focus on benefiting their members instead of making profits.
- Can anyone join a credit union?
- Membership rules depend on the credit union. Many require a connection like work, location or membership in a group, but some have easy eligibility requirements.
- What are the drawbacks of using a credit union?
- Credit unions may have fewer branches, less advanced technology and a limited range of services compared to traditional banks.
- How do bank fees compare to credit union fees?
- Credit unions typically have lower fees than banks. They aim to save members money, while banks focus on generating profits.
Elizabeth Constantineau contributed to the reporting for this article.