The Pros And Cons Of Credit Unions (2024)

Credit unions can be a good place for your finances, especially when it comes to loans. Unlike banks, they are nonprofits owned by their members so they can be more flexible in the interest rates they charge. If you’re looking into joining a credit union, consider your priorities to determine if it could be the best option for you.

The Pros

Better interest rates on loans

Credit unions typically offer higher saving rates and lower loan rates compared to traditional banks. If you have high-interest loans and are falling behind on your monthly loan payments, lowering that amount can make it easier to keep up. This is a great way to get back on track if your credit has been suffering.

High-level customer service

People generally come before profits when it comes to most credit unions, because anyone who joins one is considered a member rather than a customer. Members receive personalized service and a high-level customer service experience. As a valued credit union member, you can expect respect and care no matter where you stand financially.

Lower fees

Since credit unions don’t pay federal taxes, they usually charge lower fees. They also have fewer fees than banks.

A variety of services

When joining a credit union, be sure to check the services they offer. Many credit unions offer services similar to those offered at banks such as:

  • Checking and savings accounts
  • Credit cards
  • Mortgage loans
  • Consumer loans
  • Vehicle loans
  • Money transfers
  • Online banking
  • Financial literacy resources

If you’re looking to build credit and save money, joining a credit union might be worth looking into. However, it’s important to also be aware of the downsides that come with it.

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The Cons


Credit unions have more latitude than banks to collect unpaid loans. This is due to a concept called cross-collateralization. Let’s suppose you have your mortgage, credit card and checking account at the same credit union. If you were to fall behind in payments on the credit card, the credit union could take the money out of your checking account, which could cause your mortgage check to bounce.

In comparison, a traditional bank must get a court order before taking money from either your checking or savings account tocover a delinquent loan – even if both the checking account and loan are at the same bank.

This suggests it might be prudent to keep your checking and savings accounts at a bank and your credit card, auto loan or mortgage at a credit union. This way, your checking account won’t be cross-collateralized with your debts (credit card and mortgage). This will protect you from the danger of having money taken out of your checking account to pay an auto loan or mortgage.

Fewer branches, ATMs and services

Generally, credit unions also have fewer branches and ATMs than banks. However, some credit unions have offset this weakness by joining networks of surcharge-free ATMs.

Some credit unions are not insured. While the National Credit Union Administration insures accounts up to $100,000 for many credit unions, there are still some that remain unprotected. Some credit unions do not offer as many services as banks so it’s important to learn what they offer before opening an account or applying for a loan.

The biggest negative

The biggest con to credit unions is that in some cases you must be a member of a specific group of people in order to join. For example, the employees of the Public Service Company (a supplier of electric power) founded the Public Service Credit Union. For many years you had to be an employee of the company to join the credit union. However, many credit unions (including this one) have now opened their membership to just about everyone. Before you leap in, it would pay to make sure you can join the one you’ve chosen.

Is it better to belong to a credit union or a bank?

When choosing between a credit union or a bank, consider what’s most important to you. If lower fees and better rates are the most important factors, a credit union may be the right choice. However, a bank might be a better option if you’re looking for more convenient access to your finances.

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The Pros And Cons Of Credit Unions (2024)


What is the pros and cons of a credit union? ›

The pros of credit unions include better interest rates than banks, while the cons include fewer branches and ATMs.

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

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.

Which of the following is a downside for credit unions? ›

Choosing to use 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.

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

Is a credit union a good idea? ›

There are many benefits of credit union membership.

Unlike banks, credit unions are owned by the members they serve. This means that any profits can pay off for credit union members in the form of lower fees and higher savings rates.

Is your money safe in a credit union? ›

Just like banks, credit unions are federally insured; however, credit unions are not insured by the Federal Deposit Insurance Corporation (FDIC). Instead, the National Credit Union Administration (NCUA) is the federal insurer of credit unions, making them just as safe as traditional banks.

Which is safer banks or credit unions? ›

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.

Why should I switch to a credit union? ›

Better rates

According to a study by Informa Research Services, credit unions have lower average rates on credit cards, auto loans, personal loans, and home equity lines of credit. In addition, credit unions have higher average return rates on personal savings, checking, money market, and 1-year certificate accounts.

Can a credit union crash like a bank? ›

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.

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.

Should I be worried about credit unions? ›

Money held in credit union accounts is insured through the National Credit Union Administration (NCUA). Many types of accounts are covered by insurance such as checking, savings, certificates of deposit, money market accounts, and others.

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

What is the main downside to opening an account at a credit union? ›

Membership requirements. To open an account with a credit union, you must become a member. Many credit unions determine membership eligibility based on where you live, work or worship.

What is a threat to credit unions? ›

Cyberattacks are one of the greatest threats financial institutions face. The average financial security breach costs approximately $5.97 million. For credit union cybersecurity, this means keeping up to date with the latest cyber solutions is critical to protecting member data and their good name.

What is the biggest benefit of using 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. However, a bank may offer more branches and products than a credit union.

Is your money safe at a credit union? ›

Just like banks, credit unions are federally insured; however, credit unions are not insured by the Federal Deposit Insurance Corporation (FDIC). Instead, the National Credit Union Administration (NCUA) is the federal insurer of credit unions, making them just as safe as 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.

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.


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