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.

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

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.

What's the difference between banks and credit unions quizlet? ›

A credit union is a cooperative, which means it is owned and operated by its members, as opposed to being owned by its stockholders like a bank. Your initial membership deposit makes you a part owner of the credit union and gives you a say in the credit union's decisions.

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.

How do credit unions differ from banks because they do not? ›

Since credit unions are member-driven and not for profit, members receive higher interest rates on savings, lower rates on loans and lower fees. On the other hand, profits made by banks are only distributed among their shareholders, meaning that the money banks make isn't returned to the people they make it from.

What are three 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's the biggest difference in credit unions and typical banks? ›

Banks operate as for-profit institutions. Anyone can open an account with a bank, whereas credit unions have membership requirements. Commercial banks typically offer various banking products to consumers and businesses, including checking or savings accounts, personal loans, auto loans, or mortgages.

Why are credit unions better than banks? ›

Better interest rates: Credit unions typically offer higher interest rates on savings accounts because they have lower overhead costs than banks. Similarly, they offer lower interest rates on loans. Customer service: Credit unions pride themselves on offering better customer service than banks.

What are the same between banks and credit unions? ›

Similarities between credit unions and banks

You'll find the option to open a savings account or a checking account at either a bank or a credit union. Most also offer the same type of loans, such as personal loans, mortgages, auto loans and student loans.

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 the downside of 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.

What are the negatives of a credit union? ›

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. If the benefits outweigh the downsides, then joining a credit union might be the right thing for you.

Will credit unions crash like banks? ›

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.

Are credit unions safer than banks during a 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 are the different ways banks and credit unions are viewed? ›

These distinctions impact the range of products and services offered by each financial institution, as well as their approach to customer/member relationships. While national banks may prioritize their investors regarding profit distribution, Credit Unions take a different approach by directly benefiting their members.

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.

Which is better for you a bank or credit union? ›

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.

Why are credit unions so much better than banks? ›

Above all, one of the most acclaimed credit union advantages is that all deposits remain secured. You won't lose your hard-earned money because the National Credit Union Association (NCUA) backs credit union deposits. Each depositor's account is insured for up to $250,000.

Do credit unions invest your money? ›

When you choose a credit union, your money is invested back into the community through loans and other services. Find a credit union near you and learn more about how credit unions invest in their communities.

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