Credit Unions vs. Banks: 4 Things to Consider

What’s the difference between a credit union and a bank? Which financial institution should you trust with your money? When you’re deciding, choose the one that offers the services that matter most to you.


Banks are for-profit enterprises owned by a group of investors, otherwise known as shareholders. At a bank, anyone is eligible to open an account. The drawback though is account holders at a bank are customers who don’t have a say in how the bank is run. Instead, the bank focuses on the investors’ profits. This often means higher fees and minimum balances required in accounts.

Credit unions are not-for-profit financial institutions owned by their members. You must meet a set of requirements and pay a membership fee to become part of a credit union. Credit unions only open their membership to those within their community of people who are tied by a bond. This bond could be a common employer, location, faith, organization, and more. Once becoming a member, you can vote for a volunteer board of directors who steer the credit union in the best interests of its members. This often means profits earned are reinvested into the products and services of the members, providing lower interest rates for loans and higher-interest savings accounts.

Products & Services

Banks and credit unions offer similar products and services. The biggest difference is the amount offered per branch and the difference in rates.

Since banks are larger entities that stretch across the country and employ more people, they can offer more niche products and services compared to credit unions. The drawback, though, is the cost of those products and services. To make money for their investors, banks have more and higher fees than credit unions. The “free” checking account you can open at a bank often comes with stipulations like a minimum balance. In addition, banks tend to serve higher fees in cases of bounced checks or overdrafts.

While there is an initial membership fee to open an account, credit unions do not require a minimum balance or a monthly service charge. And fees for a bounced check or overdrafts are often lower than what a bank charges. Since credit unions reinvest their profits, this means they can offer lower interest rates on loans and higher interest rates on savings accounts. That’s more money in the member’s account! Unfortunately, credit unions don’t offer as many products and services as a bank does. Yet, due to their mission to serve the community, products and services are tailored to what the people in the community need.

Note: Both bank and credit union accounts are insured up to $250,000 through the FDIC or NCUA.

Customer Service

Customer service at a bank differs from place to place. A local, community bank is going to have more personalized customer service than the mega banks. The biggest perk the mega banks emphasize is their technological advancement and completing all banking online. So if you prefer to have all your financial solutions from the comfort of your home, check out a bank.

Expect personalized service at a credit union. Especially within your local community. You may come across a teller who remembers you from the last time you entered the branch and strikes up a friendly conversation. So you can come to expect attentive customer service representatives that are ready to serve and answer any question.


Whenever you go on vacation, you won’t have to worry about finding your bank. Banks, especially national banks, have physical branches and ATMs stretched across the country ready to help you with your next financial transaction. Regional banks may not have the same footprint as the big banks, yet they still have quite a few more branches and ATMs compared to credit unions.

The perk of a credit union is its dedication to your community. This means when you leave home, you won’t find a physical branch. Instead, you need to look to see if your credit union is part of the Co-op Shared Branch network. This way, you can enter a participating credit union branch or use an ATM while you’re away and still be able to complete transactions.

Consider every factor when choosing a financial institution. Not every bank will be the same as the next bank, and not every credit union will offer the same service as a different credit union. Find an institution that focuses on you and your financial goals.

To learn more about the differences, check out this article from Forbes.