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If you’re weighing the choice between a credit union versus a bank, there are a few important things to consider about the two types of financial institutions. The main difference between a credit union and a bank is that credit unions are not-for-profit, whereas banks are for-profit enterprises. Knowing about the other differences will affect which home you choose for your checking account, savings account or certificate of deposit.
Credit union vs. bank: Differences at a glance
Banks | Credit unions |
|---|---|
For-profit. | Not-for-profit. |
Usually lower interest rates on deposit accounts, especially at national banks. | Usually higher interest rates on deposit accounts. |
Federal Deposit Insurance Corp. (FDIC) insures up to $250,000 per depositor, per insured bank, per account ownership category. (Learn more about the FDIC insurance limit.) | The National Credit Union Administration (NCUA) insures up to $250,000 per share owner, per insured credit union, per account ownership category. (Learn more about NCUA insurance.) |
Typically less or no emphasis on community. | Emphasis on community. |
National banks have many more branches; regional ones don’t have quite as many. | Fewer branches than banks, but may share branches via a network. |
Often quicker to roll out new apps and other tech. | Generally lag in new technology. |
Credit union advantages
Typically offer slightly higher interest rates on deposits than brick-and-mortar banks.
Tend to offer lower interest rates on loans.
Emphasis on community.
Credit union disadvantages
Membership may require meeting certain work, residential or occupational requirements.
Many typically offer branches only in a limited area or region.
Bank advantages
More branches in the region or across the country.
Typically quicker to roll out new apps and other tech.
Bank disadvantages
For deposit accounts, big banks and traditional banks typically offer interest rates that are much lower than the national average rates.
Tend to have higher interest rates on loans.
» Learn more: What is a bank?
Credit union vs. bank: What to consider when choosing
Choosing between a bank and a credit union may involve some tradeoffs on interest rates, technology and tools, and ATMs and branches.
Interest rates: On average, credit unions tend to offer higher rates on deposits and lower rates on loans.(Check out average bank interest rates for savings accounts, CDs and more.)
Technology and tools: Banks often adopt new technology and tools more quickly, especially online banks, which are typically able to offer higher-than-average interest rates.
ATMs and branches: Broad ATM and branch networks are the norm for national banks; credit unions might belong to large, cooperative networks of ATMs, such as Allpoint, and offer shared branches. If in-person service matters to you, look at banks and credit unions that have local branches. If you just need to withdraw or deposit cash on a regular basis, verify you’ll have enough fee-free ATMs nearby.
» MORE: Get further guidance on how to choose a bank or credit union
Banks are for-profit enterprises, while credit unions are not-for-profit.
Credit unions in principle exist to serve a community of people tied by a “bond of association,” which may be based on location, employer, faith, membership in another organization or other factors.
To serve its community, a credit union provides financial products on the most favorable terms it can afford to offer.
Some banks and credit unions charge fees.
Ask about monthly maintenance and overdraft fees. Many banks and credit unions offer ways for customers to waive a monthly fee, such as having at least one monthly direct deposit or maintaining a minimum balance.
While many financial institutions have eliminated or cut back on charging for overdrawn accounts, for the banks and credit unions that still charge for them, overdraft fees can get quite expensive, often in the range of $30-35, and can sometimes be charged multiple times per day.
» CONSIDER: See our picks for the best national banks, best online banks and best credit unions
Making your choice between a credit union and a bank
Identify what features matter to you most. Figure out which account and customer service features work best for your situation, and make a prioritized list.
Find your top contenders. Research which national, local and/or online banks and credit unions offer the best account features for what you need. Consider NerdWallet’s recommended credit unions and national banks.
Narrow the list based on your top criteria. Other aspects to consider: Do some contenders on your list perform better in ways you might value in the future (such as having a great digital experience, extensive ATM access or loan offerings)? Do any negatives (higher fees, too few branches) change your mind about which to choose?
Once you’ve found a bank or credit union that suits your needs, apply for an account.
» RELATED: Learn how to open a bank account
Credit union vs. bank: Frequently asked questions
Here are answers to some common questions about how credit unions compare with banks.
Are credit unions safer than banks?
Federally insured credit unions and banks are both safe places to keep your money. The National Credit Union Administration protects deposits (within certain limits) at insured credit unions and the Federal Deposit Insurance Corp. protects deposits (within certain limits) at insured banks.
Is it better to use a credit union or a bank?
To decide if a bank or a credit union is better for you, you’ll need to identify what’s important to you and how each type of financial institution matches your priority. If you want higher deposit rates and don’t need access to branches across the country, for example, you might prefer a credit union. If you want access to in-person services and don’t mind lower interest rates, a bank might be more suitable.
What’s the main difference between a credit union and a bank?
The main difference between a credit union and a bank is that credit unions are not-for-profit, whereas banks are for-profit enterprises.
Member FDIC
SoFi Checking and Savings
APY
4.60%
Min. balance for APY
$0
CIT Bank Platinum Savings
APY
5.05%
Min. balance for APY
$5,000
BMO Alto Online Savings Account
APY
5.10%
Min. balance for APY
$0
I have a deep understanding of the concepts related to banking and financial institutions, and I can provide comprehensive information on the differences between credit unions and banks, as outlined in the article you shared.
Credit Unions vs. Banks: Key Differences
-
Nature of Institution:
- Banks: For-profit enterprises.
- Credit Unions: Not-for-profit organizations.
-
Interest Rates:
- Banks: Typically offer lower interest rates on deposit accounts, especially at national banks.
- Credit Unions: Usually provide higher interest rates on deposit accounts.
-
Insurance:
- Banks: Insured by the Federal Deposit Insurance Corp. (FDIC), covering up to $250,000 per depositor, per insured bank, per account ownership category.
- Credit Unions: Insured by the National Credit Union Administration (NCUA), covering up to $250,000 per share owner, per insured credit union, per account ownership category.
-
Community Emphasis:
- Banks: Typically have less emphasis on community.
- Credit Unions: Place a strong emphasis on community.
-
Branches and ATMs:
- Banks: National banks have more branches; regional ones may have fewer.
- Credit Unions: Have fewer branches but may share branches via cooperative networks. ATMs may be part of networks like Allpoint.
-
Technology Adoption:
- Banks: Often quicker to adopt new apps and technology.
- Credit Unions: Generally lag behind in adopting new technology.
-
Loan Rates:
- Banks: Tend to have higher interest rates on loans.
- Credit Unions: Often offer lower interest rates on loans.
Considerations When Choosing Between a Credit Union and a Bank:
-
Interest Rates:
- Credit unions tend to offer higher rates on deposits and lower rates on loans.
-
Technology and Tools:
- Banks, especially online ones, often adopt new technology more quickly.
-
ATMs and Branches:
- Banks have broader ATM and branch networks; credit unions may rely on cooperative networks.
-
Community Focus:
- Credit unions prioritize community service.
-
Membership Requirements:
- Credit unions may have specific eligibility criteria (work, residential, occupational).
Making Your Choice:
-
Identify Priorities:
- Figure out what features matter most to you.
-
Research:
- Explore national, local, and online banks and credit unions based on your needs.
-
Narrow Down:
- Consider factors like digital experience, ATM access, and future needs to narrow your options.
-
Apply:
- Once you find a suitable institution, apply for an account.
Frequently Asked Questions:
-
Safety:
- Federally insured credit unions and banks are both safe.
-
Decision Criteria:
- Choose based on your priorities – credit unions for higher rates, banks for in-person services.
-
Main Difference:
- Credit unions are not-for-profit, while banks are for-profit enterprises.
Feel free to ask if you have any specific questions or if you'd like more detailed information on any of the mentioned points.
