Credit Unions Vs. Banks: Which Is Right For You? | Bankrate (2024)

Credit Unions Vs. Banks: Which Is Right For You? | Bankrate (1)

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Key takeaways

  • Both banks and credit unions offer a variety of financial products, including checking accounts and deposit accounts such as savings, money market and certificates of deposit (named "share certificates" at credit unions).
  • Banks and credit unions differ in that banks are typically for-profit institutions and credit unions are not-for-profit, distributing their profits among their members.
  • A credit union typically serves a specific community or region and requires that you qualify for membership based on certain criteria. A bank often requires you to provide personal information such as name, date of birth, contact information and government-issued ID, to open an account.
  • Most banks and credit unions are federally insured by the Federal Deposit Insurance Corp. (FDIC) and the National Credit Union Administration (NCUA), respectively.

Your priorities and what you value in a bank will help you determine where to keep your money. Comparing banks with credit unions in your search might make sense.

Banks and credit unions both offer a number of financial products, including savings accounts and certificates of deposit (CDs). The main difference between the two is that banks are typically for-profit institutions while credit unions are not-for-profit and distribute their profits among their members. Credit unions also tend to serve a specific region or community.

There are pros and cons to opening a bank account with either a bank or credit union, but it’s important to know which more closely aligns with your needs. When you find the right bank account, it’ll be easier to save, manage the account and get access to helpful features.

Banks vs. credit unions

BanksCredit unions
Who they serveMostly customers in an area where the bank has a branch, unless it’s an online-only bank.It could be a certain region, employer or common group.
Savings and CD ratesTypically lower than the national average.Generally above the bank national average.
Do they have branches?Yes, traditional banks typically have branches, though online-only banks have none.Yes, though some credit unions are online only.
TechnologyGenerally, larger brick-and-mortar banks have advanced technology. Smaller banks might not.Some larger credit unions have advanced technology, but smaller credit unions might not.

Bankrate insight

  • There were 4,614 banks and 4,645 credit unions that were federally insured in the third quarter of 2023. (FDIC and NCUA)
  • While the number of credit unions declined from the previous year, the total assets held at all credit unions increased by around 3.6 percent from the third quarter of 2022 to the third quarter of 2023. (NCUA)
  • The average checking account holder sticks with the same bank or credit union for 17 years on average. (Bankrate)
  • Deposits at FDIC-insured banks have decreased for six straight quarters. (FDIC)
  • Two thirds of U.S. adults are worried they don’t have enough savings to cover a months’ worth of living expenses if they lost their primary source of income. (Bankrate)
  • More than half of Americans surveyed said they can’t pay for an emergency expense of at least $1,000 from a savings account. (Bankrate)


Advantages of banks

  1. More locations: Brick-and-mortar banks may have branches and ATMs down the street from where you work or live. And larger ones may also have locations wherever you travel across the country.
  2. Variety of options: Some of the largest banks in the country, such as Chase or Bank of America, are brick-and-mortar banks, but banks can also be small and local or regional and may provide more personalized service. There are also plenty of online-only banks for the digitally minded.
  3. Advanced technology: Banks are a little ahead when it comes to technology, van Faassen says. They may offer more comprehensive mobile banking apps and special savings features, such as automated saving.
  4. FDIC insurance: FDIC banks are insured for a standard amount of $250,000 per depositor, per FDIC-insured bank per ownership category.

Disadvantages of banks

  1. Lower savings rates: Many of the large, traditional banks in the U.S. don’t offer competitive annual percentage yields (APYs) on their savings products.
  2. High balance requirements or maintenance fees: Some banks are known for charging fees, though there are usually ways to waive them.

Credit unions

Advantages of credit unions

  1. Higher rates: Credit unions are not-for-profit organizations owned by their members. “That’s the main difference between (banks and credit unions),” says Rutger van Faassen, head of marketing strategy at analytics provider Curinos. Credit unions typically provide better savings and lending rates, van Faassen says.
  2. NCUA insurance: Federally insured credit unions are backed by the U.S. government. Your money is safe if a credit union fails. Check the NCUA’s Share Insurance Estimator to see how insurance rules apply to member share accounts, which can help you determine what’s insured and if any amount exceeds the coverage limits.
  3. Personal connection: Credit unions tend to be local or regional and often service a specific community. As such, the service a credit union provides may be more personalized, and you may also be supporting an institution that upholds your values.

Disadvantages of credit unions

  1. Limited access: Credit unions typically are local or regional and may not serve your area. It may not make sense to bank at a credit union that has no branches near you.
  2. Higher rates may be available at online-only banks: Online-only banks, also known as direct banks, tend to have more competitive savings and CD yields.
  3. Membership requirements: You might have to live or work in a certain region to become a member of a credit union. Or the field of membership, which is the common bond shared by the credit union members, might have other requirements.

Brick-and-mortar banks vs. online-only banks

There are advantages and disadvantages to both brick-and-mortar and online-only banks.

Depending on their size, brick-and-mortar banks may operate thousands of branches, just one or some number in between. Online-only banks, on the other hand, usually don’t operate any branches, opting instead to offer their products and services solely over the internet. Similarly to brick-and-mortar banks, some online banks offer accounts to customers anywhere in the U.S., while others only allow consumers in certain states or areas to open accounts.

Because they don’t have overhead costs associated with operating bank branches, online banks are able to attract customers by offering higher yields on savings accounts, money market accounts and CDs, though not all online banks offer competitive rates. Online banks are also known for not charging maintenance fees.

Brick-and-mortar banks sometimes offer signature guarantee services in the form of a notary or medallion signature stamp for transferring securities. Services such as these, along with safe deposit boxes, are why some consumers prefer to have accounts at brick-and-mortar banks.

Bank/credit union trends

  • Branches are closing rapidly: A little more than 4 percent of bank branches closed from June 9, 2022 to June 30, 2023, according to Bankrate’s analysis of FDIC data. Also, more than 20,000 branches have closed since 2009, according to analysis of FDIC data.
  • The decline of overdraft fees: Various banks and credit unions have either cut or plan to cut or reduce their overdraft fees. Alliant Credit Union, Ally Bank and Capital One are just a few of the financial institutions that have been at the forefront of this trend.
  • The average overdraft fee decreased 11 percent from 2022 to 2023 to $26.61 according to Bankrate’s 2023 checking account and ATM fee study.
  • More households are gaining access to bank or credit union accounts: In 2021, 4.5 percent of households were “unbanked,” meaning they had no bank account, according to the FDIC. While it’s still important to account for that 4.5 percent, the number of unbanked households is the lowest it’s been since the FDIC began the survey in 2009.
  • Socially and environmentally conscious banking: Some financial institutions are becoming more conscious of their impact on the world at large, including where they invest their money. The Global Alliance for Banking on Values is a network of banks committed to prioritizing the environment and local communities. Many banks have also shifted from paper statements to paperless statements to reduce the amount of paper waste they produce.
  • Americans lost nearly $8.8 billion to fraudulent scams in 2022, an increase of 30 percent in fraud losses compared with 2021, according to the Federal Trade Commission.

Are banks safer than credit unions?

FDIC banks and NCUA credit unions are both backed by the full faith and credit of the U.S. government and offer similar protections. Both institutions protect up to $250,000 per depositor, per federally insured bank or credit union, per ownership category.

Other factors to consider

Here are some other things to consider when choosing between a bank and a credit union.

  • Are branch and ATM locations convenient?
  • Is the bank or credit union part of an ATM network?
  • Does it reimburse some or all out-of-network ATM fees?
  • Do customer-service hours work with your schedule?
  • Check Bankrate’s reviews to research and compare banks.

List of most popular banks and credit unions by state

Sources: FDIC and Credit Unions Online
AlabamaRegions BankRedstone Federal Credit Union
AlaskaWells FargoAlaska USA Federal Credit Union
ArizonaChase BankDesert Financial Credit Union
ArkansasArvest BankArkansas Federal Credit Union
CaliforniaChase BankSchoolsFirst Federal Credit Union
ColoradoWells FargoEnt Credit Union
ConnecticutM&T BankAmerican Eagle Financial Credit Union
DelawareM&T BankDel-One Federal Credit Union
FloridaWells FargoSuncoast Credit Union
GeorgiaTruist BankDelta Community Credit Union
HawaiiBank of HawaiiHawaiiUSA Federal Credit Union
IdahoU.S. BankIdaho Central Credit Union
IllinoisChase BankAlliant Credit Union
IndianaChase BankTeachers Credit Union
IowaU.S. BankGreenState Credit Union
KansasCapitol Federal Savings BankCommunityAmerica Credit Union
KentuckyU.S. BankAbound Credit Union
LouisianaChase BankBarksdale Federal Credit Union
MaineBangor Savings BankAtlantic Federal Credit Union
MarylandM&T BankSECU MD
MassachusettsCitizens BankDCU
MichiganHuntingtonLake Michigan Credit Union
MinnesotaWells FargoWings Financial Credit Union
MississippiRegions BankKeesler Federal Credit Union
MissouriU.S. BankFirst Community Credit Union
MontanaGlacier BankWhitefish Credit Union
NebraskaPinnacle BankCobalt Credit Union
NevadaWells FargoGreater Nevada Credit Union
New HampshireTD BankService Credit Union
New JerseyWells FargoAffinity Federal Credit Union
New MexicoWells FargoNusenda Credit Union
New YorkChase BankBethpage Federal Credit Union
North CarolinaTruist BankState Employees Credit Union
North DakotaGate City BankFirst Community Credit Union
OhioHuntingtonWright-Patt Credit Union
OklahomaBancfirstTinker Federal Credit Union
OregonU.S. BankOnPoint Community Credit Union
PennsylvaniaPNC BankPSECU
Rhode IslandCitizens BankNavigant Credit Union
South CarolinaFirst Citizens BankFounders Federal Credit Union
South DakotaFirst Interstate BankBlack Hills Federal Credit Union
TennesseeRegions BankEastman Credit Union
TexasWells FargoRandolph-Brooks Federal Credit Union
UtahZions BankAmerica First Credit Union
VermontM&T BankNew England Federal Credit Union
VirginiaTruist BankNavy Federal Credit Union
WashingtonChase BankBECU
West VirginiaCity National Bank of West VirginiaBayer Heritage Federal Credit Union
WisconsinBMOLandmark Credit Union
WyomingGlacier BankBlue Federal Credit Union

Bottom line

When shopping around for the right bank or credit union, always look out for fees, minimum balance requirements and what rates are offered on savings products. You might also want to consider accessibility — whether that be by branch location or by digital means.

Most consumers keep their bank account with the same institution for over a decade, so it pays to make a decision that you feel confident with. But don’t hesitate to switch to a new bank or credit union, especially when some institutions are offering yields that far outpace others.

Credit Unions Vs. Banks: Which Is Right For You? | Bankrate (2024)


Is a bank or credit union better for me? ›

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.

What is the downside of banking with a credit union? ›

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.

Is my money safer in a bank or credit union? ›

Like banks, which are federally insured by the FDIC, credit unions are insured by the NCUA, making them just as safe as banks. The National Credit Union Administration is a US government agency that regulates and supervises credit unions.

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

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.

Why should I use a credit union instead of a bank? ›

Member-based mentality results in better customer service. Credit unions are owned by their members, so members are usually the focus of the institution. This means that credit unions are generally known for providing better customer service than banks. Nonprofit structure means better rates and lower fees.

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.

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'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 safe if banks crash? ›

The NCUA insures depositors' funds up to the same threshold as the FDIC, $250,000. Just like banks, deposits above the $250,000 mark at credit unions are uninsured, But unlike banks, credit unions do not have the same level of risk exposure to the factors that took down SVB and other troubled lenders.

What happens to credit unions when banks collapse? ›

If the bank fails, you'll get your money back. Nearly all banks are FDIC insured. You can look for the FDIC logo at bank teller windows or on the entrance to your bank branch. Credit unions are insured by the National Credit Union Administration.

Are credit unions in danger of failing? ›

No. 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.

What are the biggest risks facing credit unions? ›

Here are eight risks that credit union leaders can expect in 2024.
  1. People-Centric Practices Are In, Passwords Are Out. ...
  2. Cybercrooks Will Prefer Social Engineering. ...
  3. Identity Attack Surface Will Expand as Digital Engagement Grows. ...
  4. Multi-factor Authentication Schemes Will Find Favor With Cybercriminals.
Feb 2, 2024

Can the government take your money from a credit union? ›

Through right of offset, the government allows banks and credit unions to access the savings of their account holders under certain circ*mstances. This is allowed when the consumer misses a debt payment owed to that same financial institution.

What are the three top credit unions? ›

  • No. 1 — Navy Federal Credit Union.
  • No. 2 — State Employees' Credit Union.
  • No. 3 — Pentagon Federal Credit Union.
  • No. 4 — Boeing Employees' Credit Union.
  • No. 5 — SchoolsFirst Federal Credit Union.
  • No. 6 — Golden 1 Credit Union.
  • No. 7 — America First Credit Union.
  • No. 8 — Alliant Credit Union.
Apr 16, 2024

What is the biggest difference between a bank and a credit union? ›

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.

What are 3 differences between a bank and a credit union? ›

But compared to banks, credit unions tend to be smaller, operate regionally and are not-for-profit. In many instances, they offer lower rates on loans, charge fewer fees and offer better interest rates for deposit accounts than traditional banks.

What is a benefit of being a member at a credit union? ›

Credit unions can offer great interest rates and low fees. Rather than paying profit margins to investors, credit unions put profits back into the business by offering low interest rates on loans and high interest rates on savings accounts, effectively giving any extra money back to credit union members.


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