Bank vs. Credit Union

Banks and credit unions both offer financial products such as checking accounts, savings accounts, CDs and loans. However, credit unions tend to offer better interest rates than banks, while banks are likely to have a wider range of products and more convenient services.

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    Jennifer Schell

    Jennifer Schell

    Financial Writer

    Jennifer Schell joined Annuity.org in 2022. She is a professional writer with more than three years of experience creating content for a variety of industries ranging from travel to tax accounting. She combines her strong writing skills and her passion for educating others to write engaging and informative financial content for Annuity.org.

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    Savannah Hanson
    Savannah Hanson, financial editor for Annuity.org

    Savannah Hanson

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    Savannah Hanson is an accomplished writer, editor and content marketer. She joined Annuity.org as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.

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    Peggy James, CPA
    Peggy James CPA

    Peggy James, CPA

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    Peggy James is a certified public accountant with a Master of Accounting. She has spent the past several years of her career focused on working in higher education finance roles. Peggy also has accounting and finance experience working in the corporate and nonprofit sectors.

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  • Updated: September 20, 2022
  • This page features 6 Cited Research Articles
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APA Schell, J. (2022, September 20). Bank vs. Credit Union. Annuity.org. Retrieved September 24, 2022, from https://www.annuity.org/personal-finance/banking/bank-vs-credit-union/

MLA Schell, Jennifer. "Bank vs. Credit Union." Annuity.org, 20 Sep 2022, https://www.annuity.org/personal-finance/banking/bank-vs-credit-union/.

Chicago Schell, Jennifer. "Bank vs. Credit Union." Annuity.org. Last modified September 20, 2022. https://www.annuity.org/personal-finance/banking/bank-vs-credit-union/.

What Is the Difference Between Banks and Credit Unions?

The main differences between banks and credit unions arise from the fact that banks are for-profit institutions while credit unions are not-for-profit. Banks also tend to be larger and may offer a wider range of products than credit unions. Credit unions, however, are smaller institutions that might offer better interest rates and fewer fees associated with transactions.

Ownership and Membership

A significant difference between banks and credit unions is the way they structure ownership. Banks operate similarly to other corporations and are owned by their shareholders. The bank’s customers have no ownership in the bank and do not have the power to make decisions about how the bank operates.

Credit unions, however, are owned and operated by their members as a not-for-profit organization. When you join a credit union, you’re able to use its products and services — but you can also vote for the union’s board members or run for election to the board yourself. Because credit unions are not-for-profit, profits generated by credit unions are paid back to the members in the form of higher savings rates and lower loan rates.

Insurance

Whether you choose to open an account at a bank or a credit union, your money will most likely be insured by the federal government. Banks are insured by the Federal Deposit Insurance Corporation (FDIC), while credit unions are insured by the National Credit Union Administration (NCUA).

Both institutions are backed by the full faith and credit of the U.S. government, so you can feel confident that your money is safe in either. The standard deposit insurance coverage limit for both the FDIC and NCUA is $250,000 per depositor, per institution, per account ownership category.

Products and Services

Banks and credit unions offer many of the same services and products to their customers. Both institutions offer products like checking accounts, savings accounts, certificates of deposit (CDs) and loans including mortgages, auto loans and personal loans. Both banks and credit unions offer services to individuals and many also provide banking services to businesses.

Interest Rates and Fees

Because banks must turn a profit for their shareholders, you’re likely to find higher interest rates for loans and lower interest rates on savings accounts or CDs than offered by their credit union counterparts. However, some online banks offer highly competitive interest rates on high-yield savings accounts.

In general, credit unions offer lower rates for loans and higher interest rates for financial products like CDs and savings accounts. This is because credit unions are owned by their members, so they pass any profits generated on to those members as better interest rates on the credit union’s products.

Another result of the credit union business model is that they typically have lower fees. Credit unions are also more likely to disclose all fees associated with products upfront, whereas banks may charge hidden fees.

Mortgages

Banks and credit unions can both offer mortgage loans, and both typically provide a relatively fast turnaround on loan decisions. However, there are some key differences in how these institutions offer mortgage loans.

Since they are larger financial institutions, banks are more likely to have a dedicated team of mortgage lenders. Banks will generally also offer a more diverse range of mortgage options, such as loans with a low down payment or specialized options like USDA and VA loans.

You might, however, find more competitive mortgage rates at your local credit union. Credit unions offer lower interest rates for mortgages than banks, although they may not have the same number of mortgage loan options. Many credit unions will also provide additional financial literacy resources to customers as a way of offering more personalized service.

Technology and Features

Banks tend to offer more technological resources than credit unions. For example, most banks now offer apps that customers can use to check their balances or even deposit checks right from their phones. Banks might also have more physical branches and ATMs, making them more convenient than credit unions.

Credit unions can also offer services like mobile banking, but these institutions usually have fewer physical locations where you can go to ask questions or complete transactions in person.

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Pros and Cons of Credit Unions and Banks

Both banks and credit unions have advantages and disadvantages that can have a big impact on your personal finances. To help decide if a bank or credit union is best for you, here are some pros and cons to consider.

Bank Pros & Cons
Pros
  • Wider variety of products and services
  • More physical branches and ATMs
  • More advanced service technology (i.e. mobile banking)
Cons
  • Higher fees
  • Higher loan interest rates
  • Lower savings product interest rates
Credit Union Pros & Cons
Pros
  • Lower fees
  • Lower loan interest rates
  • Higher savings product interest rates
Cons
  • Limited product offerings
  • Fewer physical branches
  • May not have service options like mobile banking

Credit Unions vs. Banks FAQs

Is your money safer in a credit union or in a bank?
Because credit unions and banks are both insured by the federal government for up to $250,000 per depositor per account ownership category, both institutions are extremely safe places to put your money.
Should you use a credit union or a bank?
Deciding which financial institution is right for you will depend on your individual situation. If you prefer lower fees and better interest rates, a credit union might be best, while those who want convenience and a wider variety of services might prefer a bank.
Are credit unions federally insured?
Credit unions are insured by a U.S. government agency called the National Credit Union Administration for up to $250,000 per depositor, per credit union, per account ownership category.
Do all credit unions offer lower fees?
In general, credit unions offer lower fees than banks. This is a way of returning the profits of the credit union’s services back to its members.
Do credit unions have mobile banking?
While mobile banking is more commonly offered by banks, many credit unions do offer this convenient service. Check with your local credit union to see if they provide mobile banking.
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Last Modified: September 20, 2022
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6 Cited Research Articles

Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. Credit Union of Southern California. (n.d.). Are Credit Unions Safer Than Banks? Retrieved from https://www.cusocal.org/Learn/Financial-Guidance/Blog/Are-Credit-Unions-Safer-than-Banks
  2. Credit Union of Southern California. (n.d.). Credit Unions vs. Banks: Are Credit Unions Better Than Banks? Retrieved from https://www.cusocal.org/Learn/Financial-Guidance/Blog/Credit-Unions-vs-Banks
  3. SECNY Federal Credit Union. (n.d.). Difference Between Credit Union and Bank. Retrieved from https://secny.org/difference-between-credit-union-and-bank/
  4. Town and Country Bank. (2021, May 5). Banks vs. Credit Unions: Who Should You Choose for Your Home Loan? Retrieved from https://www.townandcountrybank.com/Blog/Posts/150/Personal-Finance/2021/5/Banks-vs-Credit-Unions-Who-Should-You-Choose-for-Your-Home-Loan/blog-post/
  5. Williams, G. (2019, March 15). The Pros and Cons of a Credit Union Versus a Bank. Retrieved from https://money.usnews.com/banking/articles/the-pros-and-cons-of-a-credit-union-versus-a-bank
  6. Wingo, L. (2022, January 28). Banks vs. Credit Unions: What’s the Difference? Retrieved from https://www.uschamber.com/co/run/finance/differences-between-banks-and-credit-unions