April 3, 2020

Credit Unions vs Banks

Read more about Bank Reviews & Deals
This article contains references to products from our partners. We may receive compensation if you apply or shop through links in our content. You help support CreditDonkey by reading our website and using our links. (read more)

Are credit unions better than banks? What's their major advantage? Take a look at the main differences before you join.

© CreditDonkey

While many people understand the concept of a bank, credit unions might seem confusing.

Both banks and credit unions are financial institutions that accept deposits from customers and issue loans to borrowers.

Credit unions offer many of the same services as banks, such as checking, savings accounts and loans. You need to be a member to use a credit union. The first credit unions only allowed membership to groups who had something in common, such as where they lived or worked. Nowadays, the requirements to join are looser.

What Are the Differences?

The biggest difference between credit unions and banks is ownership. Banks are owned by shareholders who distribute the profits among themselves. Credit unions are member-owned, nonprofit institutions that return profits to members in the form of higher deposit interest rates and lower fees.

Credit unions typically have membership restrictions for joining that can be based on where you live or work. Banks will let most people join, unless you have a history of late payments and overdrafts.

Banks and credit unions also differ in regulation:

  • Banks are regulated at both the state and federal level. Their regulators include the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve.

  • The National Credit Union Administration (NCUA) regulates national credit unions, and the remaining credit unions are regulated by state.

Are credit unions safe?
Yes, most credit unions offer the same protections that banks do. It's important to verify that your credit union is backed by the NCUA so that your money is insured. NCUA insurance provides the same coverage that banks receive from the FDIC.

Credit Union Pros and Cons


  • Better rates
    • Because they are member-owned, credit unions usually charge lower rates for loans. They also tend to pay higher interest rates on checking and savings accounts.

  • Lower fees
    • Credit unions often offer free checking accounts without a minimum balance or service charge. You'll also pay less for overdrafts and bounced checks.

  • Community focus
    • Credit unions emphasize great customer service for their members. They'll often give back to the community through charity as well.


  • Restricted membership
    • Many credit unions will prevent you from joining if you don't meet certain membership requirements.

  • Lack of insurance with some credit unions
    • Not all credit unions carry NCUA insurance. Always verify that your credit union has deposit insurance so that your money is safe.

  • ATM availability
    • You may have a difficult time finding a surcharge-free ATM with a credit union since their ATM networks are usually smaller.

Can anyone join a credit union?
Credit unions have membership requirements. Oftentimes, the requirements are centered around where you work or live. If you don't meet those requirements, you can still join if you have a family member who's part of the credit union. You could also be eligible by donating to a specific charity.

Bank Pros and Cons


  • Convenience
    • Banks often operate more physical locations and have larger ATM networks where you can avoid ATM fees.

  • Technology
    • Big banks have a lot of resources. This makes them more likely to offer newer, convenient technology, like mobile deposit and Zelle®.

  • More services
    • Banks usually offer a greater variety of products and services, like retirement accounts and credit cards.


  • Higher fees
    • Shareholders, convenience, and technology come at a cost, and this means banks often charge higher fees than credit unions.

  • Higher loan interest rates
    • Banks want to make a profit, so they it makes sense for them to charge higher interest rates on loans.

  • Shareholder-driven
    • At the end of the day, banks answer to their shareholders, unlike member-focused credit unions.

Which Is Best for You?

Perhaps the idea of joining an organization and becoming a member appeals to you. You might also not like the idea of handing your money over to a for-profit institution. If so, a credit union is your best bet.

On the other hand, maybe the advanced services and latest technology that come with a bank matter more to you. If you prioritize convenience and easy access, banks have more branches and ATM locations.

When deciding, make sure that you pay attention to the fees and interest rates for the bank or credit union. Ultimately, it's your money and you'll want to make sure that you choose an institution that will help your financial journey.

Best Banks and Credit Unions


  • Ally Bank
    • Ally is an online-only bank that offers some of the highest deposit rates and lowest fees in the country.

  • Chase
    • Chances are that if you're visiting a city in the U.S., there's a Chase bank branch available. Chase boasts a large variety of credit card products with good rewards programs.

Credit Unions

  • Alliant Credit Union
    • Alliant Credit Union's online-only model serves those looking for a national credit union with lax membership requirements. Alliant's deposit rates on checking and savings accounts often exceed industry standards.

  • Navy Federal Credit Union (NFCU)
    • If you have ties to the army, NFCU could be a good option for you. They operate branches throughout the country and have a robust ATM network.

Bottom Line

These days, it's hard to avoid using the services of either a bank or a credit union. Whether you're looking for a credit card or seeking a mortgage, you'll have to choose one.

Credit unions offer a better return on your money with higher deposit rates and lower loan rates. Banks offer the latest technology and more convenience. It's important to weigh the pros and cons and choose the one that's best for your needs.

Write to Jeffrey B at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

Read Next:

How Do Banks Work

How Do Banks Work

How to Choose a Bank: Beginner's Guide

How to Choose a Bank

Are Online Banks Safe?

Are Online Banks Safe

Member FDIC

Chase Total Checking® - $225 Bonus

Expires 1/19/2022
  • New Chase checking customers enjoy a $225 bonus when you open a new Chase Total Checking® account and set up direct deposit
  • Access to 16,000 Chase ATMs and more than 4,700 branches
  • Chase Mobile® app - Manage your accounts, deposit checks, transfer money and more -- all from your device.
  • Open your account online now
  • Available online nationwide except in Alaska, Hawaii and Puerto Rico. For branch locations, visit locator.chase.com.
Chime Alternatives

Chime Alternatives

Chase Total Checking Bonus

Chase Total Checking Bonus

Best Check Cashing Apps

Best Check Cashing Apps

Discover Savings Bonus: $150 or $200 Promotion

Discover Savings Bonus

Why Do Checking Accounts Have Fees

Why Do Checking Accounts Have Fees

Citi Accelerate High-Yield Savings Account Review

Citibank High Yield Savings

Leave a comment about Credit Unions vs Banks?

Savings Calculator

Savings Calculator

Your money earns interest in your savings account. But how quickly will it grow? Use this free savings calculator to see how much you'll earn over time.

Next Page:

About CreditDonkey
CreditDonkey is a bank comparison website. We publish data-driven analysis to help you save money & make savvy decisions.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed on this page are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

†Advertiser Disclosure: Many of the offers that appear on this site are from companies from which CreditDonkey receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). CreditDonkey does not include all companies or all offers that may be available in the marketplace.

*See the card issuer's online application for details about terms and conditions. Reasonable efforts are made to maintain accurate information. However, all information is presented without warranty. When you click on the "Apply Now" button you can review the terms and conditions on the card issuer's website.

CreditDonkey does not know your individual circumstances and provides information for general educational purposes only. CreditDonkey is not a substitute for, and should not be used as, professional legal, credit or financial advice. You should consult your own professional advisors for such advice.

About Us | Reviews | Deals | Tips | Privacy | Do Not Sell My Info | Terms | Contact Us
(888) 483-4925 | 680 East Colorado Blvd, 2nd Floor | Pasadena, CA 91101
© 2021 CreditDonkey Inc. All Rights Reserved.