Bank vs. Credit Union: What's the Difference?
How banks and credit unions differ in ownership, rates, fees, deposit insurance and access, how to join a credit union and how to decide which is better for checking, savings, loans and cards.
Listen to this article
Key takeaways
- Banks are for-profit companies owned by shareholders; credit unions are not-for-profit cooperatives owned by their members.
- Both are insured up to $250,000 per depositor, per institution, per ownership category: banks by the FDIC, federally insured credit unions by the NCUA.
- Credit unions often charge less on loans; federal credit unions are capped at 18% on most loans, a ceiling the NCUA has extended through September 2027.
- Banks usually win on branch and ATM networks, technology and product range; online banks often pay the highest savings rates.
Banks and credit unions offer the same everyday products: checking and savings accounts, CDs, credit cards, car loans and mortgages. The difference is who they work for. A bank answers to shareholders; a credit union answers to its members, who are also its owners. That structure shapes prices and service, but not always in the way people expect, so it pays to compare specific accounts rather than institutions.
Bank vs. credit union at a glance
| Bank | Credit union | |
|---|---|---|
| Ownership | Shareholders (for-profit) | Members (not-for-profit cooperative) |
| Who can join | Anyone | People in the field of membership: an area, employer, school, group or family tie |
| Deposit insurance | FDIC, $250,000 per depositor, per bank, per ownership category | NCUA, $250,000 per member, per credit union, per ownership category |
| Loan rates | Market rates | Often lower; federal credit unions capped at 18% on most loans |
| Savings rates | Low at many large banks; high at online banks | Often above big-bank rates |
| Fees | Vary; large banks often charge maintenance and overdraft fees | Often lower or easier to avoid |
| Access | Large branch and ATM networks at national banks | Fewer own branches; shared branching and ATM networks extend reach |
| Technology and products | Usually broader | Varies widely by size |
| Taxes | Pay federal income tax | Federally exempt from income tax as cooperatives |
Is my money as safe at a credit union?
Yes, at a federally insured credit union. The National Credit Union Share Insurance Fund, run by the NCUA, covers deposits (called shares) up to $250,000 per member, per credit union, per ownership category, backed by the full faith and credit of the U.S. government, just like FDIC insurance at banks. A small number of credit unions are privately insured instead; the sign at the branch and on the website tells you which. How the ownership categories multiply coverage is explained in FDIC insurance limits.
Rates and fees
Because credit unions return profits to members rather than shareholders, they often charge less on car loans, personal loans and credit cards and pay more on savings than large national banks. Federal credit unions are also limited to an 18% interest rate on most loans, and they can offer small payday alternative loans capped at 28%; see payday alternative loans. But online banks, which have no branches, frequently pay the highest savings rates of all, so a credit union is not automatically the best deal. Compare actual APYs and APRs.
How to join a credit union
- Find one you qualify for. Membership can be based on where you live or work, your employer, a school, military service, a religious or community group, or a family member who belongs. Some credit unions let anyone join by first joining a partner association for a small fee.
- Open a share account. A small deposit, often $5 to $25, buys your membership share.
- Provide identification as at any bank: Social Security number, a government ID and proof of address.
The NCUA's online credit union locator lists federally insured credit unions and their membership rules.
Access and convenience
Large banks have thousands of branches and ATMs. Most credit unions are local, but many belong to the CO-OP shared branch network, which lets members make deposits and withdrawals at other participating credit unions, and to surcharge-free ATM networks that rival big banks. Mobile apps at small credit unions can be more basic; check the app's reviews and features such as mobile check deposit and Zelle before you switch.
Which is better for what?
| Need | Often the better fit |
|---|---|
| Car loan or personal loan | Credit union, especially with fair credit; compare auto loan rates |
| High savings rate | Online bank or credit union; compare APYs in high-yield savings accounts |
| Nationwide branches, travel, business banking | Large bank |
| Rebuilding credit | Credit union share-secured loans and secured cards |
| Premium rewards credit cards | Large banks and card issuers |
Many people use both: a big bank for everyday checking and a credit union for loans, or an online bank for savings. The trade-offs of branchless banks are covered in online banks vs. traditional banks.
Both kinds of institution are insured up to $250,000 per depositor; what happens if a bank fails explains how quickly insured money is paid out.
Frequently asked questions
Are credit unions better than banks?
Often for loan rates and fees, not always for savings rates, branch access or technology. Compare the specific products you need.
Is money safer in a bank or a credit union?
Equally safe at federally insured institutions: FDIC for banks, NCUA for credit unions, both with $250,000 standard coverage.
Can anyone join a credit union?
Each credit union has a field of membership, but many are open to people who live or work in an area, and some let anyone join through a partner organization.
Do credit unions check credit to open an account?
Many check banking history reports such as ChexSystems, like banks do. If you have been denied, see second-chance bank accounts.
Can I have accounts at both a bank and a credit union?
Yes, and it is common. Spreading deposits can also increase your total insurance coverage.
