Comparing Credit Unions to Banks: Making Decisions
Compare credit unions vs. banks to make informed financial decisions. Learn key differences, benefits, drawbacks, fees, interest rates, and more to choose the best option for your savings and loans.
March 18, 2025 16:54
Comparing Credit Unions to Banks: Making Decisions
When deciding between a credit union and a bank, there are some crucial factors to take into account regarding the two forms of financial establishments. A credit union and a conventional bank vary primarily in that one is not-for-profit while the other is a for-profit business. Knowing the various variations will influence the house you decide upon for your certificate of deposit, savings account, or checking account.
Credit Union vs. Bank: Differences at a Glance
| Feature | Banks | Credit Unions |
|---|---|---|
| Profit Model | For-profit | Not-for-profit |
| Interest Rates on Deposits | Typically lower | Usually higher |
| Insurance | FDIC insures up to $250,000 per depositor, per insured bank, per account ownership category | NCUA insures up to $250,000 per share owner, per insured credit union, per account ownership category |
| Community Focus | Typically less emphasis | Emphasis on community |
| Branch Availability | More branches, especially national banks | Fewer branches, but may share via a network |
| Technology Adoption | Often quicker to roll out new apps and tools | Generally lags in new technology |
Benefits of Credit Unions
Generally offer higher interest rates on deposits than brick-and-mortar banks.
Usually provide lower interest rates on borrowing.
Strong community emphasis.
Downsides of Credit Unions
Membership may require meeting specific employment, residential, or occupational criteria.
Branches are often limited to specific regions.
Bank Benefits
More branches, either nationwide or regionally.
Typically faster in adopting new technology and mobile banking features.
Bank Downsides
Large and traditional banks generally offer lower interest rates on deposit accounts.
Usually have higher loan interest rates compared to credit unions.
Credit Union vs. Bank: Factors to Weigh
Interest Rates, Technology, ATMs, and Branches
Interest Rates: Credit unions typically provide better rates on deposits. Traditional banks tend to have lower savings rates, though online banks often offer competitive rates.
Technology: Banks usually embrace new technologies and tools faster than credit unions.
ATM and Branch Networks: National banks have extensive ATM and branch networks, while credit unions often participate in cooperative networks like Allpoint.
Fees
Some credit unions and banks charge fees for maintenance and overdrafts.
Many allow customers to waive monthly fees by maintaining a minimum balance or setting up direct deposits.
Overdraft fees at financial institutions that still charge them can be costly, typically around $30–$35 per occurrence.
For-Profit vs. Not-For-Profit Businesses
Credit unions are not-for-profit organizations designed to serve members with financial products on reasonable terms.
Banks are for-profit institutions that aim to maximize profits for shareholders.
Deciding Between a Credit Union and a Bank
Identify the qualities most important to you (e.g., interest rates, customer service, technology).
Research national, local, and online banks and credit unions.
Compare fees, services, and account features.
Consider long-term benefits such as loan options, digital banking experience, and ATM access.
Frequently Asked Questions
Do Credit Unions Present Less Risk Than Banks?
Both banks and credit unions that are federally insured offer the same level of protection for deposits. The National Credit Union Administration (NCUA) insures credit unions, while the Federal Deposit Insurance Corporation (FDIC) insures banks.
Should I Use a Bank or a Credit Union?
Your choice should depend on your financial priorities. Credit unions may be ideal for higher savings rates and lower loan costs, while banks offer broader branch access and advanced digital tools.
What Is the Main Difference Between a Credit Union and a Bank?
The primary distinction is that credit unions are not-for-profit, meaning they reinvest earnings to benefit members, whereas banks are for-profit, focusing on revenue generation for shareholders.
Savings Account Comparison
| Bank | APY | Min. Balance for APY | Insurance |
| Forbright Bank | 4.25% | $0 | FDIC Member |
| Axos ONE® Savings | 4.86% | $1,500 | FDIC Member |
| Varo Savings Account | 5.00% | $0 | FDIC Member |
| E*TRADE Premium Savings | 4.00% | $0 | FDIC Member |
