Banks vs. Credit Unions: Which Is Best or You?

Banner image
ByAlvin Yam, CFP
Edited byVictoria Copans
ByAlvin Yam, CFP
Edited byVictoria Copans

Updated: May 16, 2024

Advertising & Editorial Disclosure

Banks are for-profit financial institutions that offer a wide range of services. They make money by charging interest on loans, fees for services and investing customer deposits. Banks are owned by shareholders who expect a return on their investment.

Credit unions are not-for-profit financial cooperatives owned and controlled by their members. They offer many of the same services as banks, but because their primary focus is on providing affordable financial services to their members, credit unions typically have lower fees and better interest rates than banks.

The best option for you comes down to what you value. If you travel often and want access to local branches and ATMs, a national bank is better for you. But if you want lower fees and access to the best interest rates, you’ll get the most out of a credit union that serves your region or neighborhood.


How Banks and Credit Unions Differ

Banks are for-profit institutions, and your deposits into bank accounts are typically secured by the Federal Deposit Insurance Corporation (FDIC). Credit unions are not-for-profit institutions, with deposits secured by the National Credit Union Administration (NCUA).

Banks and credit unions offer the same basic financial services, but credit unions gain an edge over banks when you compare localized opportunities and standard interest rates. For example, a credit union might offer special interest rates on mortgages for first-time homebuyers in a specific region that bigger banks can’t compete with.

Credit Union


Deposits are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per insured bank.

Deposits are insured by the National Credit Union Administration (NCUA) up to $250,000 per depositor, per insured credit union.

Interest Rates

Banks typically offer lower interest rates on savings accounts and higher interest rates on loans.

Credit unions generally offer higher interest rates on savings accounts and lower interest rates on loans.


Banks often charge higher fees for services like checking accounts, overdrafts and ATM usage.

Credit unions typically have lower fees or no fees for many services.

Credit cards

Banks offer a wide range of credit card options with various rewards programs and interest rates.

Credit unions may have more limited credit card options, but often with lower interest rates and fees.


Anyone can open an account at a bank, as long as they meet the bank's requirements.

Credit unions have membership requirements, usually based on factors like employment, community or association.

Is a Bank or Credit Union Better for You?

When choosing between a credit union and a bank, first decide what aspects are more important to you. Credit unions often offer lower fees, better interest rates and more personalized service and tend to focus on community involvement.

Banks may offer more technological features, a wider range of services and more financial products, but their fees and interest rates are generally less competitive than credit unions. If in-person service at a branch is important to you, choose a bank or credit union with convenient access to nearby branches.

Pros of Banks and Credit Unions


A wider range of financial products and services such as investment options, wealth management and business services.

Typically have lower fees for various services such as checking accounts, loans and credit cards.

Typically have extensive branch networks and ATM presence across multiple states or even worldwide.

Member-owned and operated, with a focus on member needs rather than profit maximization.

Advanced technological offerings such as mobile apps, digital wallets and even AI-powered assisting technology.

Tend to offer higher interest rates on savings accounts and lower interest rates on loans.

More international banking services and support for global transactions.

Tend to have a stronger focus on community and local involvement.

Cons of Banks and Credit Unions

Credit Unions

Higher fees for various services such as checking accounts, loans and credit cards.

Smaller branch and ATM networks compared to large banks.

Tend to offer lower interest rates on savings accounts and higher interest rates on loans.

Typically offer fewer financial products and other services.

Tend to have stricter lending criteria and requirements.

Their technological offerings may lag behind larger banks.

Profit-driven, which prioritizes their shareholders over their customers.

Membership requirements can be restrictive, based on employment or geographic location.

May lack community focus and local involvement.

More limited international banking services and support for global transactions.

Banks vs. Credit Unions: Stakeholders vs. Shareholders

One key difference between banks and credit unions is their ownership structure. This distinction is important because it directly impacts an institution’s decision-making process and how it serves its customers or members. Generally, credit unions take their profits and “give back” to member-owners through special offers, low rates and access to special services. Banks are larger and usually offer more product options, but their profits go to shareholders.


Banks vs. Credit Unions: Global Versus Local Perspectives

Banks and credit unions differ in their scope and reach, which determines the types of services they offer. Banks, and especially larger national and international banks, often have a more global perspective and typically offer better services for those with international banking needs. Credit unions tend to have a local focus and may not offer any international banking services. However, they can have special regional discounts or partner with local charities, for example, to improve the quality of a particular community or neighborhood.


Banks vs. Credit Unions: Access to Branches and ATMs

Access to branches and ATMs is an important consideration when choosing between a bank and a credit union.

National banks tend to have more branches and ATMs than credit unions, making it easier to access your money without paying out-of-network fees. However, many credit unions belong to shared networks, allowing members to use other credit union ATMs for free.


Banks vs. Credit Unions: Differences in Technology

While both banks and credit unions offer online and mobile banking services, larger banks often have more resources to invest in cutting-edge technology. This may include advanced mobile apps, online bill pay and account management tools. Credit unions have caught up in recent years, offering similar technological capabilities to their members.

mglogo icon

Recently, online banks have gained popularity by offering much higher annual percentage yields (APYs) on savings accounts than traditional brick-and-mortar banks. With lower overhead costs from not maintaining physical branches, online banks can pass those savings onto customers through higher interest rates.

Many online banks offer high-yield savings accounts with APYs well above the national average, making them an attractive option for those seeking to earn more on their deposits. However, they lack physical locations, which can strain the experience of customers.

Banks vs. Credit Unions: Regulations and Rules

Both banks and credit unions are regulated by government agencies to ensure they operate safely and fairly. Banks are regulated by federal agencies such as the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC). Credit unions are regulated by the National Credit Union Administration (NCUA).

Most types of accounts at banks and credit unions are insured, including savings and checking accounts, cash management accounts, single and joint ownership accounts and business accounts.

Account types not insured through either agency are mutual funds, annuities, life insurance policies and investments such as investment funds, stocks and bonds.


Banks vs. Credit Unions: Their Roles as Fiduciaries

A fiduciary is a person or institution that has a legal duty to act in the best interests of another party. In the context of banking, fiduciary relationships are preferred over for-profit money managers because they provide a higher level of trust and accountability. Fiduciary relationships are found in both banks and credit unions, as they are regulated by federal and state agencies.

While banks and credit unions can act as fiduciaries, credit unions are more likely to have a fiduciary relationship with their members because they are member-owned.

More About Credit Unions

Unlike banks, credit unions prioritize member service over profits and can typically offer lower fees and competitive interest rates. Credit unions are exempt from state and federal taxes, which allows them to offer lower loan rates. Profits are reinvested or distributed as dividends to members.

Membership criteria, including employer affiliation, family ties, residency or group membership, can vary. Some of the different types include federal, state, college, military and community credit unions, each with its own unique benefits.

mglogo icon

Be aware of any membership requirements or limitations when choosing a credit union, especially if you plan to move. Many credit unions do not charge any membership fees to join and membership is typically free as long as you meet the basic eligibility requirements.

FAQ Comparing Banks and Credit Unions

Both banks and credit unions provide basic banking services. It’s important to understand how each one works, how each makes money and what kinds of products they offer as you decide which one is right for you.

Is a bank or credit union better for a mortgage?
Is a bank or credit union better for an auto loan?
How do interest rates compare at banks versus credit unions?
Are there downsides to banking with a credit union?
Is my money safer in a bank or a credit union?
How do credit unions benefit their communities?
What are common reasons a bank or credit union would deny my application?.
Does FDIC insurance cover multiple bank accounts?

About Alvin Yam, CFP

Alvin Yam, CFP headshot

Alvin Yam is a certified financial planner with over 15 years of experience working with individuals and corporations. He is an expert in wealth management and personal banking. Alvin is also the Founder and Managing Partner at Paraiba Wealth Management, an independent registered investment advisor.

Prior to founding Paraiba, Alvin spent five years as a Director at HSBC overseeing retail and wealth products, and was also a Financial Consultant at Charles Schwab, advising clients on investments, retirement planning and banking products.

Shield Insurance

The content on this page is accurate as of the posting/last updated date; however, some of the rates mentioned may have changed. We recommend visiting the lender's website for the most up-to-date information available.

Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone and have not been reviewed, endorsed or approved by any bank, lender or other entity. Learn more about our editorial policies and expert editorial team.