Comparing Credit Unions and Banks: What’s the Difference and Which is Better for You?

Lorie Tonogbanua

Credit unions and banks are two of the most commonly used financial institutions that offer similar services. However, as you decide where to open your checking, savings accounts, or certificates of deposit, it’s beneficial to know is best for you.

So hop on in and learn about credit unions and banks, their differences and benefits, and which one is for you.

Credit Union vs. Banks: Side-by-side Comparison

Which is better, credit union or bank? The answer is both, depending on your needs. Credit unions and banks are similar in offering personal loans, checking accounts, savings accounts, CDs, and more. However, there are pros and cons between them that can help you decide which is right for you.

Credit Unions

A credit union is a collection of people who share a “common bond” based on:

  • Residence
  • Work
  • Employment
  • Organization

Their members, not shareholders, manage credit unions. They are not-for-profit organizations that exist to serve the needs of their members. They allow their members to manage their finances by putting their resources to work for them.

Every credit union is owned by those who use it for borrowing and saving. Each credit union works by members pooling their savings and lending to one another at a fair and reasonable interest rate.

In a Credit Union, there is no need to show proof of profit as its goal is to help people save and earn money within the organization. Each credit union member also has a say in how the union is run. 

Since Credit Unions are non-profit institutions. They offer a wide variety of beneficial choices for their members. They often have:

  • Lower to no monthly fees
  • Little to no minimum required balances
  • Lower interest rates on savings and loans
  • Insured and secured deposits
  • More opportunities for loans
  • Easier access to loans and services
  • Personalized customer service
  • Anyone can be a member

In addition, federal taxes are typically not applied to unions, and some credit unions even get financial support from the associations they are linked with. As a result, credit unions are free from the pressure of turning a profit for their stockholders. This exemption helps the credit union keep its fees small and accessible to its members.

Cons of Credit Unions

Despite the many pros of being a credit union member, it also has cons. Since credit unions focus on delivering more to their members, they tend to have the following:

  • Outdated technology
  • Limited digital or online banking opportunities
  • Limited financial products
  • Fewer branches
  • Limited membership through “field of membership

They also have limited locations and tend to have fewer branches. One credit union may differ from another in a different state. This makes transferring from one credit union to another difficult.

Same with their ATM locations, but some Credit Unions have CO-OP branches with other ATM networks, which makes deposits and withdrawals easier. Credit Unions also limit their members, and each union has specific member eligibility depending on the area or locale.


A bank is a financial institution subject to federal, state, or joint regulation. Its primary responsibilities are to accept deposits and issue loans. They also offer other services such as Individual Retirement Accounts, Certificates of Deposits, currency exchange, and safety deposit boxes. Each bank has its tailored services depending on your account and the type of bank.

Banks control the movement of money between individuals and businesses, whether physical or online. More specifically, banks provide deposit accounts and safe cash storage spaces. 

Banks lend to other people or companies using the funds in deposit accounts. In exchange, borrowers pay interest on those loans to the bank. The initial deposit account holder then receives a portion of that interest back as interest.

Banks’ primary sources of income are the interest on loans and the fees they charge their clients.

Pros of Banks

As for-profit institutions, banks offer a variety of sophisticated financial opportunities to their clients, such as:

  • Diverse investment options
  • A wider range of financial products and services
  • Easily accessible locations and branches – international and local
  • Financial literacy and education
  • Credit Card and significant loan options
  • Mobile banking
  • No “field of membership”
  • More financial benefits when you access their products.

Banks also have the technology to cater to various interests and customers through convenient applications, easy access to your money, and services that adapt to real-time.

Cons of Banks

Due to its structure and uniformity, applying for a bank account is generally perceived as the ideal way of saving money. Banks are run by investors rather than members, making their commands more specified. Banks tend to have:

  • Highers fees (monthly, yearly, bi-annually, quarterly)
  • Higher interest rates on loans, investments, and other products
  • Strict application and inflexible rules

Banks may have fewer cons, but these cons help the bank improve its input to the general public and fund more opportunities to widen its financial growth.

The Difference Between Credit Unions and Banks

Credit unions and banks are two equally different financial establishments. One of the main differences between Credit Unions and Banks is that Credit Unions are not-for-profit institutions that focus on the needs of their members. At the same time, banks are generally for-profit institutions focusing on their customers’ interests and investors.

Credit Unions distribute profits among their members through memberships and loans within members, and banks earn profit through interest. This gives bank clients to explore more options for their banking experience and ensure investors of their investments.

Bottom Line: Making the Right Choice Between a Credit Union or a Bank

With all the details stated above, there is no right or wrong decision when it comes to choosing which institution is for you. The decision of which to pick is a personal one. You have to ask yourself which financial aspect you value the most. 

Whether or not you value certain aspects of banks, such as convenience and access, credit unions, with their more personal approach to handling money, choosing one that’s best for you will depend on your financial situation and your long-term money goals.

Frequently Asked Questions

Is it better to use a bank or credit union?

If you value in-house customer service and lower interest fees, choose Credit Unions. If you prefer more financial opportunities and easy access to your money, choose Banks.

Is credit unions safer than banks?

Credit Unions are insured by the National Credit Union Association (NCUA), which manages the National Credit Union Share Insurance Fund. Banks are insured by the Federal Deposit Insurance Corporation.

Can your savings grow in Credit Unions?

You receive compensation from credit unions for maintaining your funds and account. It gives out money known as a dividend, which is the same as bank interest.

What is the most significant benefit of using banks over credit unions?

Convenience and easy access no matter the location.

How does your savings grow in banks?

Banks use compounding interest to grow your funds.

What are the usual rates of Credit Unions and banks?

As of December 2022, the National Average Rate of a regular savings account (2.5k) is 14 for credit unions and .22 for banks. 

National rates still vary depending on the account and product.


  • Credit Union and Bank Rates 2022 Q4. (2023, January 10). NCUA. Retrieved March 7, 2023, from
  • Credit Union vs. Bank: Pros and Cons. (2022, July 14). MoneyWise. Retrieved March 7, 2023, from
  • What Is A Bank And How Does It Work? (2022, March 31). Forbes. Retrieved March 7, 2023, from
  • What is Interest Rate and How Does It Work? (2020, January 2). CIMB Bank PH. Retrieved March 7, 2023, from

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