Maximize Your Money: Credit Union vs. Bank? Explore Pros, Cons and Make the Smart Choice.

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We all want our hard-earned funds in secure, interest-bearing accounts. But which institution is better for your money: a credit union or bank?  Learn about the differences, pros, cons and how to determine which option suits your unique financial needs.

The Difference Between Credit Unions and Banks 

Credit unions are nonprofit financial cooperatives owned by their members. Banks, on the other hand, are for-profit business corporations owned privately or traded on the public market. 

Because banks are for-profit, they usually charge higher fees and offer lower rates on savings products than credit unions do. Many credit unions also offer donation options within their communities and free financial wellness courses, but they don’t typically don’t offer as wide a range of products as banks. 

While credit unions have traditionally been known to have better customer service than banks, the American Customer Satisfaction Index found in its 2022 report that credit unions have fallen behind banks more recently when it comes to customer satisfaction. 

Credit unions also aren’t open to everyone. There are membership requirements, such as having a certain profession or living in a specific area. For example, Suncoast Credit Union offers memberships to anyone who lives, works, attends school or worships in specific Florida counties. 

If safety is a concern, know that deposits to banks and credit unions are insured up to $250,000 per depositor per ownership category. Credit unions are insured by the National Credit Union Administration (NCUA) and banks are insured by the Federal Deposit Insurance Corporation (FDIC).

Credit Unions vs. Banks Simplified

	Credit Union	Bank
Profit status:	Non-profit	For-profit
Insured by:	NCUA	FDIC
Membership requirements?	Yes	No
Number of financial products offered:	Limited	Wide range

Both banking establishments are secure, trustworthy options — though one is likely better suited for you than another.

Bank Pros and Cons

Two main pros of banks are their lack of membership requirements and wide range of financial products. However, you can expect to pay higher fees and receive lower saving rates compared to some credit unions.

It’s important to note that while brick-and-mortar banks usually have lower rates than credit unions, online-only banks often have competitive savings rates.  

For example, Chase, which has in-person and online banking services, offers 12-month certificates of deposits (CDs) with a 3% APY. Alliant Credit Union, on the other hand, offers 12-month CDs with a 5.4% APY. 

Ally Bank, which is strictly an online-only bank, offers a 12-month CD with a 5% APY. These rates are as of Jan. 22.

Pros	Cons
Offer a wide range of financial products Tend to have updated technology Online-only banks offer competitive savings rates Don’t usually have membership requirements, though there are a few exceptions, like USAA	Usually charge higher fees than credit unions Customer service can be lacking Brick-and-mortar banks usually have low saving rates

Credit Union Pros and Cons

Credit unions prioritize consumer deposits and loan services, according to Wisconsin’s Department of Financial Institutions. Because of this, the two main pros are low loan rates and high saving rates. 

One major roadblock is the membership requirement. Often, if you don’t belong to a specific community, it doesn’t matter how great of a fit the credit union is — you can’t join. However, there are popular credit unions that allow anyone to join, including PenFed Credit Union and Bethpage Federal Credit Union.

This limitation does have a silver lining for those who do qualify. With fewer members, credit unions can prioritize high-quality customer service for their select customers. 

Pros	Cons
Traditionally have had good customer service Lower rates on loans and higher rates on savings products than many banks Fewer fees compared to banks Community-focused with free financial courses available	Requires a membership to join Limited financial products available compared to some big banks Usually lagging behind on technological updates

Sources:

Chase Bank. (2024). Lock In a CD Relationship Rate Today. Retrieved from https://www.chase.com/personal/savings/bank-cd

Ally Bank. (2024). High Yield Certificate of Deposit (CD). Retrieved from https://www.ally.com/bank/high-yield-cd/

Alliant Credit Union. (2024). Earn Big With a Certificate. Retrieved from https://www.alliantcreditunion.org/bank/credit-union-certificate#rates

Wisconsin’s Department of Financial Institutions. (n.d.). Differences Between Banks, Credit Unions and Savings Institutions. Retrieved from https://dfi.wi.gov/Pages/ConsumerServices/WisconsinConsumerAct/DifferencesBanksCreditUnionsSavingsInstitutions.aspx

Liberty Savings Federal Credit Union. (n.d.). Credit Union Vs. Bank Fee Advantages Continues. Retrieved from https://www.lsfcu.org/credit-union-vs-bank-fee-advantages-continues/

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