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Bank vs. Credit Union

Which One's Best?


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So you need a loan or a new account, and you’re not sure where to go. Both banks and credit unions can probably help you, but one may be better. What can you expect from banks vs. credit unions and why does it matter?

Ownership - the Main Difference

You may not care - or you may think it’s significant - but the main difference between banks and credit unions is ownership. Credit unions are nonprofit organizations owned by their customers, who are called 'members'.

Ideally this means you’d get a better deal at the credit union. Without outside owners demanding increasing profits, the credit union should provide great services at a fraction of the cost. However, it’s not always the case. Some credit unions just act like banks with tax benefits, and large banks may get an advantage due to their larger scale. It depends on your credit union.

Learn more about How Credit Unions Work and what it's like to be a credit union member.

Safety - Neck and Neck

Banks and credit unions both keep your money safe. If the institution goes under, some or all of your money may be guaranteed by the US government. To be safe, make sure your bank has FDIC insurance or your credit union has NCUSIF insurance.

Some credit unions are not federally insured, so they offer private insurance. While this protection is adequate in many cases (they're not necessarily bad institutions), it's not quite as safe as NCUSIF coverage.

Products - Pretty Comparable

The products available at banks and credit unions are very similar. For most of us, it’s a coin toss: either one has checking accounts, loans, savings, and CDs. Credit unions rates are often a bit better, but there are plenty of exceptions. On the other hand, banks often offer more products and services than a small credit union.

Customer Service - Varies

Both banks and credit unions can offer great customer service. They can also make mistakes.

In credit unions, service may be more personalized, and it’s easier to get to know people; there are fewer employees and fewer customers. However, they may also be less formal - especially small credit unions. If you like your bankers in pinstripes, stick to a large bank or credit union.

Banks are more likely to offer robust websites and 24-hour customer service lines. These may be valuable if you have a rigid schedule. However, some credit unions have excellent websites, and you may not need anything more than a page to view your account balance and pay some bills.

You can also bank at any credit union branch that's part of the CU Service Network -- even if you're not a member at that credit union.

Which Should You Choose?

There’s no clear answer to the bank vs. credit union question. You should consider both of them, and maybe even keep accounts open in multiple places.

For loans, you should at least inquire at a credit union, and give them some of your other business (checking, savings, etc) if you get a good deal. However, you may enjoy the horsepower of a larger bank (not necessarily the largest ones) in some areas of your life.

Once you decide where to keep your cash, learn how to switch banks while avoiding headaches.

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