Credit Unions vs. Banks: What's the Difference? (2024)

Credit Unions vs. Banks: An Overview

Bank and credit unions have several similarities and differences to consider. Both offer the same general services such as checking and savings accounts as well as various loan options. Your deposits in both credit union and bank accounts are federally insured for up to $250,000 per account, per account holder.

However, you will find differences in fees, interest rates, product offerings, convenience, and customer service, although each financial intuition is different. Credit unions tend to offer lower rates and fees as well as more personalized customer service. However, banks may offer more variety in loans and other financial products and may have larger networks that can make banking more convenient.

Key Takeaways

  • Credit unions tend to have lower interest rates for loans and lower fees.
  • Banks often have more branches and ATMs nationwide.
  • Many credit unions have shared branches and surcharge-free ATMs provided through the CO-OP Shared Branch network.
  • Banks have historically had better technology online and for mobile apps.
  • Each bank and credit union will offer different products and terms, so compare financial institutions individually.

Credit Unions vs. Banks: What's the Difference? (1)


Commercial banks, or retail banks, may be owned by investors or privately owned. Banks operate as for-profit institutions. Anyone can open an account with a bank, whereas credit unions have membership requirements.

There were 4,026 FDIC-insured commercial banks with roughly $22.5 trillion in assets, as of Dec. 31, 2023. Banks can range from one-branch community banks to larger regional and national banks.

Commercial banks typically offer various banking products to consumers and businesses, including checking or savings accounts, personal loans, auto loans, or mortgages.Banks may provide investment and saving vehicles like individual retirement accounts (IRAs), certificates of deposit (CDs), and money market accounts.

Bank deposits are federally insured for up to $250,000 by the Federal Deposit Insurance Corporation (FDIC), so your funds will be safe in the event of a bank failure.

Credit Unions

Credit unions are not-for-profit financial institutions owned by their members. They provide many of the same products and services as banks including checking and savings accounts as well as various loan products and investment accounts like IRAs.

Deposits in credit union accounts, like with banks, are federally insured for up to $250,000, but by the National Credit Union Administration (NCUA) instead of the FDIC.

As of 2024, more than 140 million people belong to a credit union. Credit union members can vote on credit union policies and participate in decisions. According to an NCUA 2022 annual report (latest report), 4,760 federally insured credit unions held assets of around $2 trillion.

Credit unions must limit their customer base to an NCUA-approved “field of membership,” such as a workplace, school, place of worship, or geographic area. National credit unions want to increase membership, so they may offer broader fields of membership, such as accepting members of a specific organization, large company, or broad geographic area.

Credit unions' profits are returned to members through benefits such as lower fees and better interest rates. According to CUNA estimates, the financial benefits provided to credit union members are equivalent to $156 per member or $328 per member household.

Credit unions were initially developed to provide limited banking services to moderate-income people within a narrow field of membership. As a result, credit unions are exempt from federal income taxes.


Due to longstanding regulations, credit unions face more limitations compared to banks, especially in investing, lending, and commercial banking.

Key Differences

Credit Unions vs. Banks
Credit UnionsBanks
Fee CostsLowerHigher
Loan Interest RatesLowerHigher
CDs and Money Market RatesHigherLower
Interest Checking and Savings RatesHigherLower
Customer Service RatingsVariesVaries
Products Offered RatingsFewerMore
Mobile App RatingsSimilarSimilar


Fees can play a significant role in choosing a financial institution. Credit unions tend to charge lower fees than banks.

Average Credit Union vs. Bank Fees
Credit UnionBank
Average Share Draft Checking NSF Fee$23.86$31.24
Average Credit Card Late Fee$24.56$34.18
Average Mortgage Closing Costs$1,151$1,361

Other 2021 research released by the Consumer Financial Protection Bureau noted that credit unions had lower overdraft and non-sufficient funds (NSF) fees.

However, dozens of fees may be charged by institutions, including monthly account maintenance fees, ATM fees, foreign transaction fees, debit card replacement fees, and other fees. Carefully review any fees important to you. You may be able to find a low-fee or fee-free account at either a bank or a credit union.

Branches and Other Access

While in-person access may not be as important as it once was, many people still desire convenient branch options and ATM access. If you frequently visit a physical branch for consumer or business services, carefully consider a financial institution's branch network.

Banks get higher customer satisfaction ratings for the number and location of ATMs and branches, compared to credit unions as surveyed by the American Customer Satisfaction Index survey. National banks lead in customer satisfaction with the highest ratings for both ATM and branch numbers and locations.

A credit union tends to have fewer branches on average than banks.For example, the nation's largest bank—Chase—has more than 4,700 branches.

To offset this disadvantage, credit unions have formed a CO-OP Shared Branch network with more than 30,000 ATMs and 5,000 shared branches nationwide. At shared branches, members can perform many in-person tasks.

Interest Rates

Credit unions typically offer higher interest returns on some products and lower interest rates on lending products.

According to a comparison of 2023 averages, credit unions tend to provide higher returns on certificates of deposit and money market accounts. However, banks offered higher average returns on interest checking and savings accounts that year.

Credit unions offered more competitive interest rates on loans in 2023, charging lower interest rates compared to banks for:

  • Credit cards
  • Fixed-rate mortgages
  • Adjustable-rate mortgages
  • Unsecured fixed-rate loans
  • Home equity loans
  • Used car loans
  • New car loans

In some cases, the rate differences were slight. However, credit unions tended to offer significantly lower rates on average for credit cards and auto loans.

Credit unions also can't charge more than 18% interest on consumer loans, with the exception of short-term loans that compete with payday loans, which can have rates as high as 28%.

Customer Service

While customer service is often touted as more of a credit union benefit, the American Customer Satisfaction Index's 2024 survey indicates that banks are slightly stronger in this area overall.

However, the difference is almost negligible, with both Credit unions and banks posting similar scores in different categories across the board, such as in courtesy and helpfulness of tellers or other staff and the speed of in-branch financial transactions. The highest-ranked customer service scores are with regional and community banks.

Product Offerings

ASCI customers scored credit unions slightly lower for various financial services available, including checking, savings, debit/credit cards, and loans. Banks score higher in this regard.

For example, many large national banks offer international banking services and products for those who often travel or live abroad. While some credit unions may offer these services and products, it's uncommon.

When comparing credit cards, national banks dominate our list of best credit cards. Credit union cards tend to focus more on offering lower interest rates versus rewards and perks.

Mobile App

Customers gave banks a slightly higher score for website satisfaction and mobile app quality and reliability in the ACSI survey for 2024; however, again, like most categories, the score differences were negligible.

You can still find excellent digital banking options at many national credit unions. Investigate mobile banking technology and check websites for simplicity and services.

Are Credit Unions Safer Than Banks?

Deposits in both banks and credit union accounts are federally insured for up to $250,000. If you have more than $250,000 to deposit at either a bank or credit union, you consider depositing the remainder with another financial institution.

What Are the Major Advantages of Credit Unions?

Credit unions typically offer lower closing costs for home mortgage loans, and lower rates for lending, particularly with credit card and auto loan interest rates. They also have generally lower fees and higher savings rates for CDs and money market accounts. Finally, members of credit unions get to vote on policies and decisions made by the financial institution.

What Are the Disadvantages of Credit Unions?

Most credit unions cannot compete with banks regarding the number and type of products offered by larger banks; however, this may not be an issue for those looking for simple banking products.

The Bottom Line

Credit unions can be ideal for a low-interest loan, lower mortgage closing costs, or reduced fees, but you'll need to qualify for membership. Larger banks may offer you more choices regarding products, apps, and international or commercial products and services, and anyone can join.

Smaller community and regional banks may give you more customer service for your buck if that's essential to you. Weigh the pros and cons of each type of financial institution to decide which best serves your needs.

Credit Unions vs. Banks: What's the Difference? (2024)


Credit Unions vs. Banks: What's the Difference? ›

Banks are typically for-profit entities owned by shareholders who expect to earn dividends. Credit unions, on the other hand, are not-for-profit, member-owned cooperatives that are committed to the financial success of the individuals, families, and communities they serve.

Is it better to use a credit union or a bank? ›

Credit unions can be ideal for a low-interest loan, lower mortgage closing costs, or reduced fees, but you'll need to qualify for membership. Larger banks may offer you more choices regarding products, apps, and international or commercial products and services, and anyone can join.

Why do banks not like credit unions? ›

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.

What are disadvantages of banking with credit unions? ›

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.

What are three big differences between banks and credit unions? ›

Credit unions and banks offer some similar services but work on a different business model.
BanksCredit unions
No membership requiredMembership required
Generally lower savings rates and higher feesOften higher savings rates and lower fees
May be national or localMay be national or local
3 more rows
Jul 10, 2023

What is safer a bank or credit union? ›

However, because credit unions serve mostly individuals and small businesses (rather than large investors) and are known to take fewer risks, credit unions are generally viewed as safer than banks in the event of a collapse. Regardless, both types of financial institutions are equally protected.

What is one of the drawbacks of a credit union? ›

The downside of credit unions include: the eligibility requirements for membership and the payment of a member fee, fewer products and services and limited branches and ATM's.

Why do people choose banks over credit unions? ›

People choose banks primarily because of the convenience of multiple branches across the country, along with better technology. On the flip side, people choose credit unions primarily because of discounted loan rates, higher interest rates and better customer service.

What are 3 pros and 3 cons for credit unions? ›

The Pros And Cons Of Credit Unions
  • Better interest rates on loans. Credit unions typically offer higher saving rates and lower loan rates compared to traditional banks. ...
  • High-level customer service. ...
  • Lower fees. ...
  • A variety of services. ...
  • Cross-collateralization. ...
  • Fewer branches, ATMs and services. ...
  • The biggest negative.
Oct 4, 2022

Are credit unions failing like banks? ›

Experts told us that credit unions do fail, like banks (which are also generally safe), but rarely. And deposits up to $250,000 at federally insured credit unions are guaranteed, just as they are at banks.

What are the biggest risks facing credit unions? ›

Credit unions face a multitude of risks including risks related to credit, interest rates, liquidity, transactions, compliance, strategy, and protecting their reputation.

Are credit unions safe during a banking crisis? ›

Credit unions are insured by the National Credit Union Administration (NCUA). Just like the FDIC insures up to $250,000 for individuals' accounts of a bank, the NCUA insures up to $250,000 for individuals' accounts of a credit union. Beyond that amount, the bank or credit union takes an uninsured risk.

What's the best credit union to join? ›

Here are some of the country's top credit unions:
  • Alliant Credit Union. Alliant offers an above-average interest rate for savings. ...
  • Consumers Credit Union. ...
  • Navy Federal Credit Union. ...
  • Connexus Credit Union. ...
  • First Tech Federal Credit Union.

Are credit unions safer than banks during recession? ›

bank in a recession, the credit union is likely to fare a little better. Both can be hit hard by tough economic conditions, but credit unions were statistically less likely to fail during the Great Recession. But no matter which you go with, you shouldn't worry about losing money.

What is the best bank to use? ›

Best Banks of April 2024
  • Capital One 360 Checking: Best online checking account.
  • Chase Total Checking®: Best for a large branch network.
  • Axos Bank Rewards Checking: Best for online account options.
  • Discover® Bank: Best for doing all of your banking at one place.
  • Synchrony Bank: Best high-yield savings account.
Mar 27, 2024

How do credit unions make money? ›

Any income the credit union generates through interest, fees and loans is then used to fund community projects, reinvest into the organization or provide services that directly benefit members, like paying higher savings interest rates.

Why are credit unions so much better than banks? ›

Why Choose a Credit Union? Lower interest rates on loans and credit cards; higher rates of return on CDs and savings accounts. Since credit unions are non-profits and have lower overhead costs than banks, we are able to pass on cost savings to consumers through competitively priced loan and deposit products.

What is the biggest advantage to a credit union? ›

The main benefits of a credit union vs. a bank are that credit unions tend to offer better rates and customer service, lower fees, and a national network of ATMs.

Is there any benefit to using a credit union? ›

Credit unions are a great choice if you are looking to have a voice in the way your financial institution is run, save money on interest and fee expenses, earn more on your savings, build relationships with those who serve you, and get timely decisions on your financial applications.

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